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Inefficient pricing from holdover bias in NFL point spread markets

Author

Listed:
  • Andy Fodor
  • Michael DiFilippo
  • Kevin Krieger
  • Justin Davis
Abstract
We identify inefficiency in the National Football League (NFL) gambling market indicative of sticky preferences by bettors. NFL teams that qualified for the playoffs in the prior season are favoured by too large a margin in the opening week of the following season. Bettors view these teams as superior though they win only 51.7% of opening week games against teams that failed to make the playoffs in the prior year. Against the point spread, teams that made the playoffs in the prior year win only 35.6% of opening week games played against teams that failed to make the playoffs in the prior year. Systematic betting based on this trend results in significant profitability over the 2004--2012 seasons with an average return over 22% per game. We posit this can be explained by gamblers' tendencies to cling to perceptions of teams formed from observation in the prior season. This confirms research in more traditional markets, suggesting investors can be slow to update asset valuations.

Suggested Citation

  • Andy Fodor & Michael DiFilippo & Kevin Krieger & Justin Davis, 2013. "Inefficient pricing from holdover bias in NFL point spread markets," Applied Financial Economics, Taylor & Francis Journals, vol. 23(17), pages 1407-1418, September.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:17:p:1407-1418
    DOI: 10.1080/09603107.2013.829201
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    Cited by:

    1. Arne Feddersen & Brad R. Humphreys & Brian P. Soebbing, 2018. "Sentiment Bias in National Basketball Association Betting," Journal of Sports Economics, , vol. 19(4), pages 455-472, May.
    2. Kevin Krieger & Justin L. Davis & James Strode, 2021. "Patience is a virtue: exploiting behavior bias in gambling markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(4), pages 735-750, October.
    3. Justin L. Davis & Kevin Krieger, 2017. "Preseason bias in the NFL and NBA betting markets," Applied Economics, Taylor & Francis Journals, vol. 49(12), pages 1204-1212, March.
    4. Justin Davis & Andy Fodor & Luke McElfresh & Kevin Kreiger, 2015. "Exploiting Week 2 Bias in the NFL Betting Markets," Journal of Prediction Markets, University of Buckingham Press, vol. 9(1), pages 53-67.
    5. Randall W. Bennett, 2019. "Holdover Bias in the College Football Betting Market," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 47(1), pages 103-110, March.
    6. Justin Cox & Adam L. Schwartz & Bonnie F. Van Ness & Robert A. Van Ness, 2021. "The Predictive Power of College Football Spreads: Regular Season Versus Bowl Games," Journal of Sports Economics, , vol. 22(3), pages 251-273, April.

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