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Journal of Sports Economics
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9/5/488    most recent
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Evidence of Betting Market Intraseason Efficiency and Interseason Overreaction to Unexpected NFL Team Performance 1988-2006

Steven G. Sapra

Analytic Investors, Los Angeles, and Claremont Graduate University, steve.sapra{at}gmail.com

A structural model is derived describing the relationship between the probability that the favored team is victorious and the point spread through the use of a "no-arbitrage'' condition. A series of probit models are developed that show that NFL wagering markets were efficient within season during the period 1988-2006 and that the point spread is a statistically significant indicator of probability of victory. A team-level excess performance metric is estimated, termed an NFL Alpha, that indicates the extent to which a team's on-the-field performance exceeded betting market expectations. Finally, it is shown that there exists a market overreaction effect for NFL Alphas across seasons.

Key Words: sports betting • market efficiency • probit • NFL • Alpha

This version was published on October 1, 2008

Journal of Sports Economics, Vol. 9, No. 5, 488-503 (2008)
DOI: 10.1177/1527002507311726
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