Preseason bias in the NFL and NBA betting markets

This article will look briefly over a study published a few days ago by Justin L. Davisa and Kevin Krieger. They extended research in the sports gaming literature by examining the efficiency of betting markets related to preseason professional sporting events. Using NFL (1995–2014) and NBA (2005–2014) data from preseason games, they examined the pricing efficiency of point spreads in these markets and considered evidence of systematic mispricing. Findings suggest that point spreads are too large in these situations, providing a profitable betting opportunity for those willing to systematically wager on underdogs. Similar findings are not seen within the context of NFL or NBA regular seasons. These findings are more pronounced as preseason point spreads become larger. Further stratification by week of the NFL preseason demonstrates that underdogs discontinue their superior performance for the one week (Week 3) in which clubs tend to expel a higher level of effort.

Regression results confirmed a model indicating that simple point spreads in each of these preseason gambling markets are too high. Retroactively checking bettor performance, they found that a simple strategy of wagering on all preseason underdogs can prove considerably and statistically significantly profitable in many situations, and these results are superior to simple wagering strategies of wagering on underdogs in regular season contests. The best opportunities for bettors to exploit these market inefficiencies occur in situations with large (3 or more) and very large (5 or more) point spreads. In both professional sports, taking a simplistic betting approach of betting on underdogs when the point spread is larger than 5 points in preseason games will lead to the largest return for the gambler (excluding preseason Week 3 in the NFL, as discussed above). These findings contribute to continued research in the area of sports market wagering and market efficiency. Further, this study considered an often disregarded topic in this area of literature: that of team/ player motivation and how this motivation (or lack thereof) influences team outcomes. Related to this team/player motivation, the study informed future research in this area about the potential for gambling market opportunity in situations of very high or very low motivation. For example, future research could examine team/player motivation and performance once that team (or player’s team) is eliminated from playoff contention. Alternatively, researchers could examine how teams/players respond at the end of a season when there is nothing to be gained or lost by winning or losing the final game of a season. This could particularly be interesting in the use of Major League Baseball given the very large number of games and the small number of teams that are admitted into the playoffs each season.

The most significant opportunity for profitable gambling occurs with point spreads larger than 5 points in NFL preseason games. For teams getting more than 5 points, underdogs cover 66.67% of Week 1 games, 61.54% of Week 2 games, and 58.62% of Week 4 games. The overall success rate of 61.65% of preseason underdogs from Weeks 1, 2, and 4 is strongly significantly greater than the regular season performance (50.45% covering) of underdogs by more than 5 points and is statistically greater than the 52.38% success level needed to demonstrate profitability. In preseason Week 3, only 50.99% (49.18%) of underdogs getting more than 3 (5) points cover spreads. Evidence suggests that preseason Week 3 games, where teams use more of their elite players for longer periods, indeed display a different dynamic from other preseason weeks. Winning frequencies greater than 52.38% are necessary for a bettor to be profitable, given typical 10% commission levels.

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