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Efficiency of Sports-Betting Markets

Efficiency-of-Sports-Betting-Markets

King Yao is the author of Weighing the Odds in Hold‘em Poker, and Weighing the Odds in Sports Betting. He uses his experience from making millions in financial derivative markets and translates it into gambling. Since he left his trading position in 2000, he has been betting on sports. He travels to Las Vegas frequently, especially during football season.

Let’s discuss some basic principles of sports betting. All sports bettors should know the information below. All other types of casino advantage players, including blackjack players of all skill sets, which includes card counters, should have good working knowledge of Expected Value as well. You should not be betting online or anywhere else without this fundamental knowledge.

Efficiency of the Sports-Betting Markets

The efficient-market theory says it is difficult or impossible to beat the market with public information. There are different levels of efficiency, ranging from strong to weak. The strong form of the theory says investors cannot consistently generate greater-than-verage market returns based on public information, and that the current market price reflects all public information about the asset. The weak form of the theory says that most public information is reflected in the current market price, but it is possible for some people to generate excess profits because markets are not completely rational all the time. While a good estimate of the value of any asset is its current market price, it is possible for someone to correctly think it is overvalued or undervalued. The weak-form of the theory seems to work well in describing most financial markets and also works well in describing the sports-betting market.

Most lines in sports betting are efficient. It is the few lines that are inefficient that allow bettors to make bets with positive EV. Without a central marketplace, sportsbooks may make the mistake of offering lines that the bettor can arbitrage. The sharp bettors have a slight edge on a number of profitable plays, but not enough to hurt the sportsbooks’ overall business since there are so many more square bettors than sharp bettors.

The efficiency of any sports-betting market depends on two things:

  • The ratio of square money to sharp money
  • Comparative knowledge between line makers and sharp bettors

When the market is not efficient, it is often due to squares betting on the negative EV side. In situations when the ratio of the square bettor’s money to sharp bettors’ money is high, sportsbooks shade their lines to increase profit and/or reduce risk. Shading lines too much gives opportunity to the sharp bettors.

In financial markets, higher volume and more trading interest usually mean more efficient markets; but this is not as often the case in sports betting. Lines on important NFL games can be more inefficient than regular season MLB games even though there is much more money bet on the NFL game. For example, Super Bowl lines can be inefficient because the ratio of square bettors’ money to sharp bettors’ money is high. Many square bettors come out of the woodwork to bet on the Super Bowl. Meanwhile, the number of sharp bettors stays the same whether it is the middle of the season or the Super Bowl. Super Bowl lines are likely to be less efficient than regular-season lines.

Other inefficiencies arise when the knowledge of sharp bettors is greater than the knowledge of line makers. This can happen in sports where there is less interest like the WNBA. Big line moves are an indication of inefficient opening lines; in general, minor sports see bigger line moves than major sports. If you have interest in a minor sport, you likely will find betting opportunities in your sport. But you won’t be able to bet as much as you could on an NFL game.

This is part of an occasional series of articles.

Excerpted with permission from the e-book version of Weighing the Odds in Sports Betting by King Yao, edited for this format.


Comments

yudietc
July 12, 2022 10:40 am
This is an awesome article! I love sports gambling, and I try to be better at it. At first, I thought it was just luck, but the more I did it, I realized that you can do stuff to have a better chance of winning. The first thing you chose is your betting platform, and I've chosen <a href="https://appsbetting.in/linebet-app/">https://appsbetting.in/linebet-app/</a>. After that, you must learn everything about the sports you choose to gamble on. You choose a few teams and follow everything you do. That's the best way to predict how they'll do in their games.

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