Sports forecasting: a comparison of the forecast accuracy of prediction markets, betting odds and tipsters

Sports forecasting: a comparison of the forecast accuracy of prediction markets, betting odds and tipsters

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Article ID: iaor200969443
Country: United Kingdom
Volume: 28
Issue: 1
Start Page Number: 55
End Page Number: 72
Publication Date: Jan 2009
Journal: Journal of Forecasting
Authors: ,
Keywords: forecasting: applications
Abstract:

This article compares the forecast accuracy of different methods, namely prediction markets, tipsters and betting odds, and assesses the ability of prediction markets and tipsters to generate profits systematically in a betting market. We present the results of an empirical study that uses data from 678-837 games of three seasons of the German premier soccer league. Prediction markets and betting odds perform equally well in terms of forecasting accuracy, but both methods strongly outperform tipsters. A weighting-based combination of the forecasts of these methods leads to a slightly higher forecast accuracy, whereas a rule-based combination improves forecast accuracy substantially. However, none of the forecasts leads to systematic monetary gains in betting markets because of the high fees (25%) charged by the state-owned bookmaker in Germany. Lower fees (e.g., approximately 12% or 0%) would provide systematic profits if punters exploited the information from prediction markets and bet only on a selected number of games.

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