Motivation

This chapter considers two dimensions of efficiency that we suspect may be related. In the context of results betting on English professional football (soccer), we test for the presence of longshot bias and for the influence of ‘sentiment’ on the odds offered by bookmakers.

Positive longshot bias (such that superior returns accrue to bets on short-odds outcomes) is a well-documented feature of many horse-race betting markets. However, Woodland and Woodland (1994, 2001, 2003) present evidence of reverse or negative bias in the odds for two American team sports, (ice) hockey and baseball. It is potentially interesting to investigate whether their finding that it is financially more rewarding to bet on underdogs generalises to team sports in other countries. If it does, analysing differences in the betting markets between horse-racing and team sports is likely to be instructive since any convincing theory on the source of longshot bias needs to be able to account for cases of both positive and negative bias (Vaughan Williams and Paton, 1998).

One of the more obvious points of difference between horse-racing and team sports is that enthusiasts for the latter tend to pledge their allegiance to a particular club and have a long-term interest in and commitment to the success of ‘their’ team. This phenomenon of ‘the fan’ may then have a real impact in the betting market. Clubs attract thousands or even millions of supporters and profit from their loyalty by selling them high-priced souvenirs such as replica shirts.