New entry, strategic diversity and efficiency in soccer betting markets: the creation and suppression of arbitrage opportunities

Grant, Andrew; Oikonomidis, Anastasios; Bruce, Alistair C.; Johnson, Johnnie E.V.

Abstract

We find that prices offered by competing bookmakers within the same quote-driven soccer (football) betting market provide arbitrage opportunities. However, the management practices of bookmakers prevent informed bettors exploiting these in practice. We identify two groups of bookmakers, ‘position-takers’ and ‘book-balancers.’ Position-takers alter their odds infrequently, while actively restricting informed traders. Book-balancers actively manage inventory by adjusting odds, and place few restrictions on their customers. We identify 545 arbitrage portfolios, and find that around 50% would require a bet on the favourite at the position-taking bookmaker. The management practices of position-takers generally prevent these opportunities being exploited in practice.

Citation

Grant, A., Oikonomidis, A., Bruce, A. C., & Johnson, J. E. (2018). New entry, strategic diversity and efficiency in soccer betting markets: the creation and suppression of arbitrage opportunities. European Journal of Finance, 24(18), 1799-1816. https://doi.org/10.1080/1351847X.2018.1443148

• Journal Article Type: Article
• Acceptance Date: Feb 15, 2018
• Online Publication Date: Mar 5, 2018
• Publication Date: Mar 5, 2018
• Deposit Date: Feb 22, 2018
• Publicly Available Date: Sep 6, 2019
• Journal: European Journal of Finance
• Print ISSN: 1351-847X
• Electronic ISSN: 1466-4364
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 24
• Issue: 18
• Pages: 1799-1816
• DOI: https://doi.org/10.1080/1351847X.2018.1443148
• Keywords: Market efficiency, arbitrage, betting markets
• Public URL: https://nottingham-repository.worktribe.com/output/919012
• Publisher URL: https://www.tandfonline.com/doi/full/10.1080/1351847X.2018.1443148
• Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in European Journal of Finance on 5 March 2018, available online: http://www.tandfonline.com/10.1080/1351847X.2018.1443148