Market Efficiency: Empirical Evidence from European Football Betting Markets

Viko Kirill Kandaurov

Student thesis: Master thesis


This paper investigates the degree of weak form information efficiency in the European football betting market between 2010 and 2018. This is done by testing the possibility of earning abnormal returns when exploiting information contained in historical betting odds. My results identify several large deviations from market efficiency. First, it is shown that a strategy of systematically betting on overwhelming favourites delivers a significant abnormal and positive expected return of up to 3.02%. Second, my analysis detects the existence of arbitrage opportunities in 7.30% of all matches, so that a risk-free profit can be achieved frequently. Third, I find evidence of a strong bias for matches where the home odds quoted by different bookmakers on the same match experience large variations. I coin this as the ‘home-disagreement bias’. My results suggest that exploiting this bias by systematically betting on the home team in matches with the highest level of disagreement delivers a significant abnormal and positive expected return of up to 13.77%. My results are robust across different sample periods, to the use of real-time data and to out-of-sample tests. The persistent existence of profitable betting rules that are not exploited away casts serious doubt on the assumption of efficient betting markets and rationally behaving bettors. This, in turn, questions the degree of rationality and information efficiency prevailing in financial markets.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2019
Number of pages96
SupervisorsPeter Feldhütter