Abstract
This article investigated the efficiency of the college football betting market for the following season’s first game for members of the final Associated Press Top 25 Poll. Market inefficiency was identified, with bets against these teams winning significantly more than half the time. Separate analysis of the top 10 and the remaining members of the Top 25 indicated that the inefficiency was due to the previous season’s top 10 being significantly overvalued in the betting market at the start of the next season. Bets against the top 10 teams won significantly more than the 52.4% necessary for profitability. This was especially true when they played non-Power 5 schools. Efficiency could not be rejected for the teams ranked 11 through 25. The study contributed to the literature on betting market efficiency by providing evidence that bettors could be backward-looking and over-rely on outdated information.
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Notes
One game was called early due to lightning and 6 games resulted in a push bet, where each team just covered the spread. There were 22 games (44 teams) where members of the previous year’s AP Top 25 played each other in the first game the following year. These games were dropped from the sample.
There were 3 games (6 teams) where members of the prior year’s final top 10 faced off in the first game of the next season. The game called early due to lightning also involved a member of the top 10. These games were dropped from the analysis, resulting in 83 games.
Six games (12 teams) were between schools ranked 11 through 25 of the previous year’s AP final poll. Thirteen games involved a top 10 team and a team ranked 11 through 25, and 6 games resulted in a push bet.
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Bennett, R.W. Holdover Bias in the College Football Betting Market. Atl Econ J 47, 103–110 (2019). https://doi.org/10.1007/s11293-019-09611-y
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DOI: https://doi.org/10.1007/s11293-019-09611-y