When do betting odds best represent the actual outcomes? Predicting NHL results based on moneyline odds movement
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School of Business |
Master's thesis
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Authors
Date
2019
Department
Major/Subject
Mcode
Degree programme
Information and Service Management (ISM)
Language
en
Pages
67+8
Series
Abstract
The sports betting market has grown quickly over the past the few decades mostly due to the digitalization of the business. The bookmakers have moved online from the physical locations. The market has thus globalized, and the competition has increased, forcing the bookmakers to produce more accurate estimates about the events to keep up with the competition. This study investigates the accuracy of NHL moneyline betting odds, in predicting the actual outcomes of games throughout the time that the betting events are open. The dataset covers three full seasons from 2015 to 2018. The odds are collected at 5 different time points for each game and the differences in the predictive power of time points is analyzed. Then, the odds and their movement is investigated further to see if there are profitable betting strategies to be found based solely on information about odds movement. The tests related to the prediction accuracy of the odds reveal that there are no statistically significant differences between the prediction accuracy for different time points. Aggregate results are rather consistent though in showing that before the day of the game, the estimates implied by the odds aren’t quite as accurate as they are during the game day. The regression tests further indicate that when the implied probability of a selection grows, the objective probability grows at a higher rate, meaning that there’s a Favorite-Longshot Bias in the market. This means that betting on a more likely outcome yields better returns on average. The tests for finding profitable betting strategies further enforce the notion of Favorite-Longshot Bias and subsequently all of the consistently profitable betting strategies, that are found, involve only betting on favorites. The data about the odds movement between time points and splitting the teams to favorites and underdogs reveals that betting on favorite teams who have had their odds rising in a given time point interval, yields a profit for 80% of the intervals. The margins are so small that none of the returns for profitable strategies are significantly larger than zero in a statistical sense but the difference to the average bookmaker margin is more significant. According to the analysis about different staking strategies, for this kind of betting system where no estimate is calculated individually for each game, simple staking strategies of betting a fixed amount or to win fixed amount, yielded the best balance of capital growth and risk. The study concludes that there is little difference in predictive power of NHL moneyline betting odds at different time points throughout the life cycle of betting events. Based on the results it’s clear that the bookmaker margin isn’t allocated evenly between favorites and underdogs and there’s an apparent Favorite-Longshot Bias in the market, which is in contrast with previous research about NHL moneyline odds. The bias logically leads to favorites being the side that offers better returns and betting on favorites with rising odds offers returns that consistently beat the bookmaker margin and are also marginally profitable.Description
Thesis advisor
Seppälä, TomiKeywords
NHL, sports betting markets, betting odds movement, betting strategy, favourite-longshot bias