Are NFL Betting Markets Inefficient?

/Are NFL Betting Markets Inefficient?

Are NFL Betting Markets Inefficient?

By | 2017-08-18T17:10:28+00:00 December 6th, 2013|Research Insights|0 Comments

An intra-week efficiency analysis of bookie-quoted NFL betting lines in NYC


We analyze the intra-week evolution of bookie-quoted National Football League betting lines in NewYork City and its implications for market efficiency. Our unique data set includes three sequential lines: (i) an outlaw line set by a single agent at the beginning of the week; (ii) Tuesday’s opening line shaped by bets from a group of eight to ten agents; and (iii) a game-time closing line shaped by the wider public. While forecast encompassing tests show that information content increases during the betting week, consistent with a reasonably well-functioning market, we also uncover significant evidence of pricing inefficiencies relating to sentiment measures. In addition, actual bets made by a number of professional gamblers appear profitable, pointing to the existence of superior analysts.

Data Sources:

Larry Merchant data collection during the 1972 NFL season.

Alpha Highlight:

Table 5 highlights the profitability of various betting strategies:


The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.

Strategy Summary:

  • Paper examines the betting line for NFL games in the 1972 season and the the particular bets of five individuals.
    • There is one “noise trader” and four “expert gamblers.”
    • There are three betting lines that are examined. The outlaw line is produced by one person in Vegas and is generally not seen by the public.  The opening line is the betting line that is first released to the public, while the closing line is the last line the public sees before each game begins.
    • The prestige 4 teams were identified before the season as the Green Bay Packers, Miami Dolphins, Pittsburgh Steelers, and Washington Redskins. In 1972, the Dolphins went undefeated and won the Super Bowl.
  • Paper finds the following:
    1. Information content of the betting line increases as the week, as a well-functioning market would.
      • This is tested by examining the outlaw line, opening line, and the closing line.
    2. There appears to be pricing inefficiencies for the four “prestige teams” and teams with the “hot hand.”
      • The 4 prestige teams have lines set too low (high) when one of them is the home (visiting) team.
      • Public places too much emphasis on whether or not teams covered the previous week (or two weeks ago).
    3. A profitable strategy exists to take advantage of these pricing inefficiencies.
      • This would be to bet on the prestige teams (and to a lesser extent bet on teams with large beat/loss of the spread from the week before – Table 5).
    4. The “expert gamblers” have significant profits, which means that superior analysts may exist.

Strategy Commentary:

  • Only examines one NFL season and the bets placed by five people.
  • The paper claims there are “pricing inefficiencies” related to sentiment.
    • Oddsmakers in Vegas will most likely move the line in any direction in order to eliminate any exposure to specific games. Remember that Vegas generally gets (1/2)*(1/11) of all bets on a game as long as there is an equal amount of money on each side of the bet. So it would be in the best interest of Vegas to price games “inefficiently” if gamblers have behavioral biases (which they most likely do).

Who’s going to win it this year? Broncos look good…Cowboys are going to win the NFC Least…Patriots are always strong…

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About the Author:

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes,, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.

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