Learning, Price Formation and the Early Season Bias in the NBA
Finance Research Letters
betting, market, NBA, efficiency, point, spread, sides, totals, over, under
Finance and Financial Management
We test the NBA betting market for efficiency and find that totals lines are significantly biased early each season, yet sides lines do not show a similar bias. While market participants generally force line movements in the correct direction from open to close, they do not fully remove the identified bias in totals lines. This inefficiency enables a profitable technical trading strategy, as the resulting win rate of our proposed simple betting strategy against the closing totals line is 56.72%.
Baryla, Edward A. Jr.; Borghesi, Richard A.; Dare, William H.; and Dennis, Steven A. (2007). Learning, Price Formation and the Early Season Bias in the NBA. Finance Research Letters 4(3), 155-164. doi: 10.1016/j.frl.2007.04.002 Retrieved from http://digitalcommons.kent.edu/finpubs/4