What Causes the Favorite-Longshot Bias? Further Evidence from Tennis

Lahvicka, Jiri (2013): What Causes the Favorite-Longshot Bias? Further Evidence from Tennis.

Abstract

In sports betting markets, bets on favorites tend to have a higher expected value than bets on longshots. This article uses a data set of almost 45,000 professional single tennis matches to show that the favorite-longshot bias is much stronger in matches between lower-ranked players, in later-round matches, and in high-profile tournaments. These results cannot be solely explained by bettors being locally risk-loving or overestimating chances of longshots, but are consistent with bookmakers protecting themselves against both better informed insiders and the general public exploiting new information.

• Item Type: MPRA Paper
• Language: English
• Keywords: favorite-longshot bias; tennis; sports betting; market efficiency
• Subjects: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports ; Gambling ; Restaurants ; Recreation ; Tourism

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