Friday, December 21, 2012

2012-12-21: The Performance of Betting Lines for Predicting the Outcome of NFL Games

It was the first week of the 2007 National Football League (NFL) season. After waiting all summer for the NFL season to begin, the fans were rabid with anticipation. The airwaves were filled with sportscasters debating the prospects of teams from both conferences and how they would perform.

Of particular interest was the New England Patriots. They had two starters out with injuries and their star receiver, Randy Moss, was questionable for the game. New England was playing against the NY Jets and their simmering rivalry add heat to the fire. Many of the sportscasters were lining up with the Jets and Vegas was favoring the Jets with a 6 point line at home.

When betting opened for the game the action on the Patriots was heavy. The shear volume of bets place on New England to win forced the sportsbooks to move the spread in an attempt to equalize betting on both sides. Eventually the line moved all  of the way to New England being a seven point favorite by game time. New England went on to win the game 38 to 14, easily covering the spread. This is one example where the collective intelligence of the NFL fans was confident that New England would win even when the "experts" thought otherwise.

We recently released a paper examining this phenomenon entitled The Performance of Betting Lines for Predicting the Outcome of NFL Games. A copy can be found on arXiv. In this paper we investigated the performance of the collective intelligence of NFL fans predicting the outcome of NFL games using the Vegas betting lines.

We found that although home teams only beat the spread 47% of the time, a strategy of betting the home team underdogs (2002 - 2011) would have produced a cumulative winning strategy of 53.5%, above the threshold of 52.38% needed to break even on a 10% vigorish.

-- Greg Szalkowski

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