Adjusting for risk in the test of gambling market efficiency
Abstract
The current standard test of efficiency in gambling markets (that is, sports betting
including horseracing) is that inefficiency exists when a betting strategy makes money.
This level of economic significance is insufficient out-of-hand. Specifically, anyone can
make money by buying a risk-free asset. We offer a new test of gambling efficiency that
evaluates the risk and return of betting strategies relative to those of alternative
investments. The method incorporates the well-documented Kelly criterion into the
current method of investigation. The home-underdog bias of NFL games is
reinvestigated with the tests indicating the bias is much less of an inefficiency than
previously reported. An additional insight provided indicates a rationale for the favoritelongshot
bias in horseracing.
Correcting for risk-adjusted returns in the test of gambling market efficiency
Mark Cuban, the flamboyant owner of......

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Title: Adjusting For Risk In The Test Of Gambling Market Efficiency
Approximate Word Count: 3887
Approximate Pages: 16 (250 words per double-spaced page)

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