NFL Betting Trends
"How Do Markets
Function? An Empirical
Analysis of Gambling on the NFL"
Steven Levitt, Prof
University of Chicago
December 2002
One of the more interesting
studies of wagering market
efficiency comes from Steven Levitt, a noted and
distinguished economics
professor at the University of
Chicago. His paper entitled,
"How Do Markets Function? An Empirical
Analysis of Gambling on the NFL",
looks at over 20,000 bets placed at an
online sportsbook during the
2001-2002 NFL season. He records
the betting habits of over 200
players in a "handicapping
tournament". This is one of the
few studies that looks at actual
bets placed. Note, however, that we feel
some of his data is flawed. He
only looks at bets within a
"tournament", and
relies on info
found on Wagerline, which is in
itself flawed. We still
find some interesting results.
Levitt makes the bold
assumption that bookmakers are
well aware of the market's
inefficiency, and they are happy
to exploit it. Conventional
wisdom has it that bookmakers
try to balance their action.
Their goal being to make money
simply on the transaction cost,
vig or juice. Levitt looks
closely at bettor tendencies. He
finds, not surprisingly that, the
public tends to bet favorites
regardless if they are home and
away. Here is quick summary of
his results.
NFL
Bettor Tendencies in Tournament
2001-20022
(19,201
Bet)
| |
# of
Bets |
Win % |
| Home Favorite |
6,741 |
49.1% |
| Visiting Underdog |
5,270 |
50.4% |
| Visiting Favorite |
4,904 |
47.8% |
| Home Underdog |
2,286 |
57.7% |
Levitt does admit that his
study focuses on only one
season. He goes on further to
show that the win percentages he
observes are consistent with the
last 20 years of NFL games
results ATS. The paper also suggests reasons for this bias.
His overall position is that
bookmakers fully understand this
bias and create a betting line
that exploits it.
SportsInsights.com has long
advocated a strategy that
utilizes this bias called "Bet Against
the Public."
This paper is an excellent
introduction to the stats and
philosophy developed by
SportsInsights.com, which suggests betting against the
public on lopsided games.
Unlike Levitt's study
SportsInsights.com's stats come
directly from the line boards of
multiple online sportsbooks.
Their betting
percentages represent actual bets
placed at sportsbooks.
READ ABSTRACT:
"How Do Markets Function? An Empirical Analysis of Gambling on the NFL"
Published: Levitt, Steven D.
"Why Are Gambling Markets
Organized So Differently From
Financial Markets?," Economic
Journal, 2004, v114(495,Apr),
223-246. |