Rationality and Efficiency in NFL Gambling Markets
Keywords:Efficient Markets Hypothesis
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Publisher:The Ohio State University
Series/Report no.:The Ohio State University. Department of Economics Undergraduate Research Theses; 2021
Football pointspread betting permits unusually direct examination of market behavior compared to traditional asset markets. We present analysis of the pointspread market as a proxy for testing efficiency and rational expectations in other financial markets. This paper proposes novel statistical and economic tests to empirically appraise the rationality and efficiency of the National Football League pointspread gambling market. Econometric analysis of a 2012-2019 sample reveals several biased trends in pointspreads and deviations from rational expectations but fails to give evidence against efficiency. These results indicate that rational expectations might not be necessary for markets to retain long-run efficiency and suggest potential compatibility between decision models incorporating bounded rationality and those which assume neoclassical market efficiency.
Academic Major: Economics
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