Article

Behavioral Biases and Sportsbook Pricing in Major League Baseball

Rodney J. Paul and Andrew P. Weinbach

in The Oxford Handbook of Sports Economics

Published in print May 2012 | ISBN: 9780195387780
Published online September 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780195387780.013.0017

Series: Oxford Handbooks

Behavioral Biases and Sportsbook Pricing in Major League Baseball

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This article discusses the literature that uses sports gambling markets as an analogy to financial markets. It also expands the study of actual sportsbook behavior, comparing the traditional models to the Levitt hypothesis and considering alternative theories, by examining the betting market for Major League Baseball (MLB). The reverse favorite-longshot bias and home/road biases are then explored. It appears that bettors prefer road favorites by a large margin, but this is not captured by the sportsbook odds, which, likely not coincidentally, tend to map closer to actual favorite win percentages. There are no statistically significant returns to betting against the public. The findings that sportsbooks do not set prices to balance the book calls into question the source of some of the earlier findings of market efficiency in sports wagering markets and its underlying support for the forecasting power of prediction markets.

Keywords: Major League Baseball; sports gambling; financial markets; sportsbooks; Levitt hypothesis; betting; bias

Article.  6078 words. 

Subjects: Economics ; Industry Studies ; Financial Institutions and Services

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