This paper develops a generalized regime-switching (GRS) model of the short-term interest rate. The model allows the short rate to exhibit both mean reversion and conditional heteroskedasticity and nests the popular generalized autoregressive conditional heteroskedasticity (GARCH) and square root process specifications. The conditional variance process accommodates volatility clustering and dependence on the level of the interest rate. A first-order Markov process with state-dependent transition probabilities governs the switching between regimes. The GRS model is compared with various existing models of the short rate in terms of (1) the statistical fit of short-term interest rate data and (2) out-of-sample forecasting performance.

This article examines the efficiency of the National Football League betting market. The standard ordinary least squares regression methodology is replaced by a probit model. This circumvents potential econometric problems, and allows the authors to implement more sophisticated betting strategies where bets are placed only when there is a relatively high probability of success. In-sample tests indicate that probit-based betting strategies generate statistically significant profits. Whereas the profitability of a number of these betting strategies is confirmed by out-of-sample testing, there is some inconsistency among the remaining out-of-sample predictions. The authors' results also suggest that widely documented inefficiencies in this market tend to dissipate over time.

ABSTRACT This article examines the efficiency of the National Football League (NFL) betting market. The standard ordinary least squares (OLS) regression methodology is replaced by a probit model. This circumvents potential econometric problems, and allows us to implement more sophisticated betting strategies where bets are placed only when there is a relatively high probability of success. In‐sample tests indicate that probit‐based betting strategies generate statistically significant profits. Whereas the profitability of a number of these betting strategies is confirmed by out‐of‐sample testing, there is some inconsistency among the remaining out‐of‐sample predictions. Our results also suggest that widely documented inefficiencies in this market tend to dissipate over time.