Price setting in the nba gambling market: Tests of the levitt model of sportsbook behavior

Rodney J. Paul, Andrew P. Weinbach

Research output: Contribution to journalArticle

28 Scopus citations

Abstract

Levitt (2004) suggested that sportsbooks do not set prices in the NFL to clear markets, as was commonly assumed, but set prices to maximize profits. This paper uses actual betting data from four sportsbooks to test the Levitt (2004) hypothesis in the NBA. For a sample of the 2004-05 to 2006-07 seasons, it is shown that favorites receive a disproportionate share of NBA pointspread bets. In addition, the percentage of bets the favorite receives increases with each additional point of the pointspread. In the totals market, it is shown that overs receive a much higher percentage of bets compared to unders and the percentage bet on the over increases with each point of the total. Unlike the NFL, however, taking a contrarian position and betting against public sentiment is not found to win more often than implied by efficiency.

Original languageEnglish (US)
Pages (from-to)137-145
Number of pages9
JournalInternational Journal of Sport Finance
Volume3
Issue number3
StatePublished - Aug 1 2008
Externally publishedYes

Keywords

  • Efficient markets
  • Gambling
  • Sportsbook

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Marketing

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