Munich Personal RePEc Archive

"White men can't jump," but would you bet on it?

Igan, Deniz and Pinheiro, Marcelo and Smith, John (2011): "White men can't jump," but would you bet on it?

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Abstract

We identify an otherwise efficient market in which racial stereotypes affect market outcomes. In this market, there are well-defined prices, well-defined outcomes, a finite time horizon, and readily available information. The market appears to efficiently process the available information, with the exception of the race of the participants. We examine data on point spreads for NBA games over the 15 seasons from 1993-94 to 2007-08. We find evidence that the racial composition of the team is related to the size of the spread and their performance against the spread. Specifically, we find that a more black team tends to face a larger point spread and that these teams perform worse against the spread. It is possible that this effect is driven by the bookmakers setting a biased point spread or driven by excessive betting on the more black team. Using a different data set containing the movement of the spread, we do not find a relationship between the movement of the spread and the racial composition of the team. As a result, we favor the explanation that the bookmakers set a biased point spread.

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