CORMSIS seminar by Andrew Grant Event

The Origin of Information in Football Betting Markets

In this paper we propose that there are two types of bookmakers in football betting markets, which we label book-balancing and position-taking bookmakers. We argue that their operational differences hold the key to the evolution of prices within the aggregate marketplace. Book-balancing bookmakers provide online services only, and operate a high-turnover, low-margin business, and do not restrict trade with sophisticated bettors. Position-taking bookmakers, conversely, operate both physical world betting shops and operate a high-margin, low-turnover business, whilst actively maintaining a clientele of unsophisticated customers. We analyse a unique longitudinal dataset relating to the odds posted by a leading book-balancing and a leading position-taking bookmaker for six major European football leagues over the 2012-13 season. The book-balancing bookmaker charges a consistently lower transaction cost, and changes their odds five times more frequently than the position-taking bookmaker, indicative of active management of the book to avoid liabilities from sophisticated clientele. The prices from the book-balancing bookmaker are more efficient predictors of match outcomes than the prices from the position-taking bookmaker. Our conclusion is that prices in football betting markets are set on the demand side, rather than the supply side as has previously been hypothesised.