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Home»Betting»Betting Markets as Useful, Advantageous Laboratories
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Betting Markets as Useful, Advantageous Laboratories

BenoItBy BenoItMay 4, 2021Updated:September 4, 2021No Comments2 Mins Read
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Point spread wagering markets parallel financial markets in numerous ways. Both markets are characterized by the presence of rational investors, informed agents, arbitrageurs, irrational traders, and sentimental participants. Like arbitrageurs and informed traders in financial markets, professional bettors stand ready to exploit any arbitrage opportunities that might arise in sports gambling markets.

11 Information about point spread wagers and information about stocks are both widely disseminated. 528 motivation, behavior, and decision-making in betting markets Sports betting “wise guys” saturate the news services and gambling trade publications with their “wisdom,” analogously to those expert stock pickers who offer their predictions for capital markets.

The bookmaker for point spread wagers has a nearperfect analogue in the form of the market maker for stocks and other securities. The bookmaker uses the point spread to balance wagers on the two teams in a contest, just as the market maker uses price to manage order flow for a stock. And, just to be clear, bettors are sports betting’s analogue to investors and traders.

Thus, because of these highlighted similarities, any findings using point spread markets can be useful for wider financial audiences. Furthermore, point spread markets possess one key feature that makes them an ideal setting for empirical studies: every wager reaches its terminal value in a fairly short period of time. The existence of a clear settling-up point is important for studies of rationality, since it allows for direct measurement of fundamental value for each wager.

A game’s perfectly observable outcome can be compared with the point spread(s) for the game so that bettors are easily able to determine which point spread wagers are winners. The single-payoff feature stands in contrast to stocks, which by definition have an infinite stream of possible future payoffs and which thereby create difficulty in connecting changes in prices to revisions of expected future cash flows.

Finally

Christopher Avery and Judith Chevalier (1999) emphasized the usefulness of bets’ relatively short lives. The short life of any given wager reduces the likelihood that new information will enter the marketplace during trading and cause spreads to change, thereby allowing researchers to focus more acutely on point spread movements caused by sentiment or by other behavioral biases.12

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