Title: Informational efficiency and price reactions in exchange betting markets
Authors: Giovanni Angelini - University of Bologna (Italy)
Luca De Angelis - University of Bologna (Italy) [presenting]
Abstract: The degree of efficiency of exchange betting markets is investigated. In particular, we test whether prices on the exchange market are set efficiently both before the beginning of a football match and in the aftermath of an event occurred during the match. First, we propose a forecast-based approach for formally testing the efficiency of pre-match prices on the exchange betting markets. Then, using event study analysis on high-frequency data, we examine the reaction of prices to events and the arrival of major news. In particular, we analyse the post-event evolution of in-play odds and their dynamic behaviour at different horizons. We test for informational efficiency in football exchange betting markets in three different directions: (i) we investigate whether there is evidence of mispricing in in-play odds as reaction to major news events (i.e. goals, red cards), (ii) we test whether the arrival of new information on the market creates systematic bias which can be exploited to set a profitable betting strategy, (iii) we focus on possible over/under-reaction by investigating the main drivers which may create deviations from efficiency. To do so, we consider a large dataset comprising prices collected every ten seconds from Betfair Exchange for all the English Premiership matches played in the five seasons from 2009/10 to 2013/14.