Inter-market Arbitrage in Betting


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We show that a combined bet at the bookmaker and at the bet exchange market yields a guaranteed positive return in 19.2% of the matches in the top five European soccer leagues. Moreover, we find that all considered bookmakers frequently offer arbitrage positions, and that they experience, on average, negative margins from these postings. Our findings indicate that bookmakers set prices not only by optimizing over a particular bet, but also by taking the future trading behaviour of their customers into account. We discuss the implications for the literature on the relationship between betting market structure and informational efficiency.