Soccer punters - Who bets and which bias is produced

Master's Thesis from the year 2012 in the subject Economics - Micro-economics, grade: 1,3, Frankfurt School of Finance & Management, language: English, abstract: The online sports betting markets industry has been gaining in popularity worldwideduring the last decade. The Internet gives punters faster access to their bookmaker andlets them easily compare the odds of many different bookmakers. Furthermore, manyonline gambling sites offer a wide range of different sports events and specialized betsfor their customers. Nowadays it is not only possible to bet on the final outcome of asoccer match, but even on the half-time result or the amount of goals scored during thematch.The betting exchange betfair makes it possible to bet against a certain outcome,meaning the punter can act as a bookmaker for a chosen event.Betting on outcomes of soccer matches is very interesting with regard to probabilitytheory because it is based on a numerical code: 0 for a draw, 1 if the home team winsand 2 if the home team loses. Therefore many textbooks on combinatorics considersoccer bets to be a prime example for probability theory. H. Matthes and H.Küchenhoff claim that soccer bets are a great example for the so-called subjectiveprobability, which they define as the degree of confidence with which an observerbelieves in the occurrence of a certain event based on the information he currently has.P(A) would be the maximum amount in EUR that he is willing to risk if he receivesexactly EUR 1 on the occurrence of A. For a bookmaker this would mean that his oddfor a certain event will not exceed 2 if he believes that the probability of its occurrenceis 50%. Hence, odds that are offered by a bookmaker on the occurrence of a certainresult reflect his individual estimation regarding the probability of the occurrence of thegiven result. Of course, bookmakers can be wrong. If it were possible to identify apattern for their mistakes, this would help in exploiting them. Furthermore, due to thegrowing competition in the sports betting market, the punter is able to choose between alarge number of bookmakers if he wants to bet on a certain outcome of an event. If thevariation between the odds of all bookmakers who offer bets on a certain event werelarge enough, the punter might have the probability to earn risk-free money by betting on all possible outcomes of this event and choosing the bookmaker that offers thehighest odds for each individual outcome. This thesis will show that there are inefficiencies in the soccer betting markets that can be exploited by punters.[...]