Journal of Finance Vol. 76 No. 6 2021
Asset Pricing and Sports Betting
Abstract
Sports betting markets offer a novel laboratory to test theories of cross‐sectional asset pricing anomalies. Two features of this market—no systematic risk and terminal values exogenous to betting activity—evade the joint hypothesis problem, allowing mispricing to be detected. Examining a large and diverse set of liquid betting contracts, I find strong evidence of momentum, consistent with delayed overreaction and inconsistent with underreaction and rational pricing. Returns are a fraction of those in financial markets and fail to overcome transactions costs, preventing arbitrage from eliminating them. An insight from betting also predicts value and momentum returns in U.S. equities.
- DOI
- 10.1111/jofi.13082
- Volume
- 76
- Issue
- 6
- Pages
- 3153-3209
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref