Efficiency of the Football Betting Market

Abstract

This thesis looks into the efficiency of the football betting markets and tries to establish if there exist weak and semi-strong form inefficiencies.
Weak form inefficiency in the form of a home favorite-longshot bias is observed, where home wins with a market estimated probability of more than 75% produce abnormal returns.
It is shown that closing odds are more correct than opening odds, and that the market absorbs information when new information in the form of match results becomes available. Furthermore, it is demonstrated that for a subset of matches, the information contained in the most recent match results of the opposing teams is undervalued. Semi-strong inefficiency is observed through the use of a prediction model earning significant profits when taking this undervaluation into account.