Not News, But News to Me

I’m not a particularly big fan of either sports or of gambling, but like many Type As I do love complex systems.  I was shooting the shit with a number of my friends this weekend and we started to discuss the question of whether there are simple and reliable ways to beat the spread.  Logic dictates that no, all participants in the sports-betting market are basically rational utility-maximizers and any enduring advantages are eroded away.  However, we hit upon the idea that betting on the underdog could be a consistently winning strategy – people like to bet on winners and for that reason there is very likely an asymmetry of funds flowing into the favorites, skewing the spread.

As it turns out, this is true and well-known to bookies.  Points spreads are deliberately skewed towards the favorites for that reason.  Bookies want to maximize the take they get from people betting on the favorites, due to that asymmetry of funds flowing into the favorites, and so you can reliably win by betting on the underdogs.  The market is rational, but not necessarily in a straightforward way.

I’m also interested in the closely related question of whether there is a similar asymmetry of funds, and thus abnormal returns, on teams from media markets of vastly different sizes.  I have a hunch that the Cowboys attract disproportionately greater betting interest than the Chiefs, and that this means there is money to be made.

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