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Prediction accuracy of different market structures – bookmakers versus a betting exchange


Franck, E; Verbeek, E; Nüesch, S (2010). Prediction accuracy of different market structures – bookmakers versus a betting exchange. International Journal of Forecasting, 26(3):448-459.

Abstract

There is a well-established body of literature on separately testing the prediction power of different betting market settings. This paper provides an inter-market comparison of the forecasting accuracy of bookmakers and a major betting exchange. Employing a dataset covering all football matches played in the major leagues of the “Big Five” (England, France, Germany, Italy, Spain) during three seasons (5478 games in total), we find evidence that the betting exchange provides more accurate predictions of a given event than bookmakers. A simple betting strategy of selecting bets for which bookmakers offer lower probabilities (higher odds) than the betting exchange generates above average, and in some cases even positive returns.

Abstract

There is a well-established body of literature on separately testing the prediction power of different betting market settings. This paper provides an inter-market comparison of the forecasting accuracy of bookmakers and a major betting exchange. Employing a dataset covering all football matches played in the major leagues of the “Big Five” (England, France, Germany, Italy, Spain) during three seasons (5478 games in total), we find evidence that the betting exchange provides more accurate predictions of a given event than bookmakers. A simple betting strategy of selecting bets for which bookmakers offer lower probabilities (higher odds) than the betting exchange generates above average, and in some cases even positive returns.

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15 citations in Web of Science®
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28 citations in Microsoft Academic
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Prediction accuracy; Betting; Bookmaker; Bet exchange; Probit regression
Language:English
Date:July 2010
Deposited On:17 May 2010 10:55
Last Modified:17 Feb 2018 17:02
Publisher:Elsevier
ISSN:0169-2070
OA Status:Closed
Publisher DOI:https://doi.org/10.1016/j.ijforecast.2010.01.004

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