Department of Accounting and Department of Economics, respectively, Eastern Michigan University. We would like to thank an anonymous referee for helpful suggestions.
Market Efficiency and the Favorite-Longshot Bias: The Baseball Betting Market
Article first published online: 30 APR 2012
1994 The American Finance Association
The Journal of Finance
Volume 49, Issue 1, pages 269–279, March 1994
How to Cite
WOODLAND, L. M. and WOODLAND, B. M. (1994), Market Efficiency and the Favorite-Longshot Bias: The Baseball Betting Market. The Journal of Finance, 49: 269–279. doi: 10.1111/j.1540-6261.1994.tb04429.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This paper examines the efficiency of the legal gambling market for major league baseball. Weak-form tests of market efficiency within and across odds lines are performed. Surprisingly, the consistently observed favorite-longshot bias in racetrack betting is shown to exist in reverse for baseball bettors. However, these and other deviations from efficiency are shown to be insufficient to allow for profitable betting strategies when commissions are considered.