Research on bookmaker odds adjustments and betting volume highlights the intricate relationship between market efficiency, bettor behavior, and bookmaker profitability. While some studies suggest that bookmakers do not consistently manipulate odds to exploit bettor sentiment, they may still benefit from imbalanced betting volumes (Flepp et al., 2012; Humphreys, 2010). Betting volume plays a key role in shaping market efficiency, influencing how odds are adjusted based on demand. In particular, fluctuations in volume can impact the proportion of bets placed on favorites, with variations observed across different sports (Paul et al., 2014).
Sentimental betting appears to be a significant factor, particularly during weekends when recreational bettors are more active. Bookmakers may adjust their odds accordingly, offering slightly more favorable prices on popular teams to attract higher betting volumes while maintaining a margin that ensures profitability (Franck et al., 2010). Betting market efficiency has been found to vary depending on race volume, with greater liquidity generally leading to more accurate odds (Walls & Busche, 1996). However, the extent to which bookmakers adjust their prices depends on risk considerations, demand elasticity, and the number of potential outcomes. Large odds adjustments can inadvertently create arbitrage opportunities, which sophisticated bettors may exploit (Montone, 2020).
Bookmakers’ superior forecasting abilities and their ability to capitalize on bettor biases contribute to their sustained profitability. The evidence suggests that rather than purely balancing books, bookmakers may selectively manage risk while maximizing speculative profits by leveraging their predictive advantage over the betting public (Levitt, 2004). These dynamics illustrate how bookmakers use a combination of statistical modeling, behavioral insights, and market adjustments to maintain an edge in the competitive betting industry.
The evidence suggests that rather than purely balancing books, bookmakers may selectively manage risk while maximizing speculative profits by leveraging their predictive advantage over the betting public
Summary of: Levitt 2004
Anecdote
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Articles Cited
- “Raphael Flepp, Stephan Nüesch, E. Franck (2012): Does Bettor Sentiment Affect Bookmaker Pricing?, https://doi.org/10.1177/1527002514521427
- Bookmakers do not systematically distort their odds to exploit bettor sentiment in the over/under 2.5 goals betting market for soccer matches, despite a strong preference for betting on the “”over”” outcome.”
- “B. Humphreys (2010): Prices, Point Spreads and Profits: Evidence from the National Football League, –
- The paper finds that bookmakers can generate higher profits by allowing imbalanced betting volumes on games, rather than trying to attract equal betting on both sides.”
- “R. Paul, A. Weinbach, K. Small (2014): The Relationship between Sportsbook Volume, Forecast Accuracy, and Market Efficiency: The NFL and NCAA Football, https://doi.org/10.5750/JPM.V8I2.888
- The paper examines the relationship between betting volume, forecast accuracy, and market efficiency in the NFL and NCAA football betting markets.”
- “Matti Metsola (2012): Evidence on the Favorite-Longshot Bias as a Supply-Side Phenomenon, https://doi.org/10.5750/JPM.V4I1.473
- The paper argues that the favorite-longshot bias in betting markets is better explained by supply-side factors, such as bookmaker pricing, rather than demand-side factors like bettor behavior.”
- “E. Franck, E. Verbeek, Stephan Nüesch (2010): Sentimental Preferences and the Organizational Regime of Betting Markets, https://doi.org/10.4284/0038-4038-78.2.502
- Bookmakers in the highly competitive European online betting market actively manage their odds to exploit sentimental bettor preferences, offering more favorable odds for bets on more popular teams, especially on weekends.”
- “W. Walls, K. Busche (1996): Betting volume and market efficiency in Hong Kong race track betting, https://doi.org/10.1080/135048596355592
- The paper examines the efficiency of the Hong Kong race track betting market using the Harville formula and cointegration analysis, and finds that betting volume is a significant determinant of market efficiency across races but not within races.”
- “M. Montone (2020): Optimal Pricing in the Online Betting Market, https://doi.org/10.2139/ssrn.2199035
- The paper finds that the optimal pricing for risk-averse bookmakers in the online betting market depends on demand elasticity and the number of outcomes, and that shocks in order flow can create arbitrage opportunities for informed investors.”
- “S. Levitt (2004): Why are Gambling Markets Organized so Differently from Financial Markets?, https://doi.org/10.1111/J.1468-0297.2004.00207.X
- The sports gambling market is structured very differently from typical financial markets, with bookmakers announcing prices and taking large positions on game outcomes, which allows them to achieve higher profits by exploiting bettor biases and being more skilled at predicting game outcomes.”
Insufficient Detail?
At times it is difficult to answer the question as there are not enough relevant published journal articles to relate. It could be that the topic is niche, there’s a significant edge (and researchers prefer not to publish), there is no edge or simply no one has thought to investigate.
