Faculty of Economics and Business Administration Publications Database

Sports Forecasting: A Comparison of the Forecast Accuracy of Prediction Markets, Betting Odds and Tipsters

Authors:
Spann, Martin
Source:
Volume: 28
Number: 1
Pages: 55 - 72
Month: January
ISSN-Print: 0277-6693
Link External Source: Online Version
Year: 2009
Keywords: Sports forecasting; Prediction markets; Combined forecasts; Rule-based forecasts
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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