Football Spreads, Runs and Market Efficiency

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In the context of investments, a runs test is a popular method for judging the efficiency of security prices. Specifically, it is a test that checks for trends among positive and negative price changes that persist longer than would be expected for a random series. The contributions of this study are threefold. 1. A procedure that equates streaks of winning and losing wagers with statistical runs is introduced and those runs are converted into W/B ratios for easy evaluation. 2. While using mechanical betting rules to probe football market efficiency is hardly novel, the focus on Las Vegas' less-followed totals (vis-a-vis point spreads) was an innovative effort to benefit from a kind of neglect effect that has produced superior returns in the stock market. 3. Finally, clear evidence that the consensus of numerous and savvy participants in a competitive market precludes unusual returns is provided.

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