Odds-setters as forecasters: The case of English football

Sets of odds issued by bookmakers may be interpreted as incorporating implicit probabilistic forecasts of sporting events. Employing a sample of nearly 10000 English football (soccer) games, we compare the effectiveness of forecasts based on published odds and forecasts made using a benchmark statistical model incorporating a large number of quantifiable variables relevant to match outcomes. The experts' views, represented by the published odds, are shown to be increasingly effective over a 5-year period. Bootstraps performed on the statistical model fail to outperform the expert judges. The trend towards odds-setters displaying greater expertise as forecasters coincided with a period during which intensifying competition is likely to have increased the financial penalties for bookmakers of imprecise odds-setting. In the context of a financially pressured environment, the main findings of this paper challenge the consensus that subjective forecasting by experts will normally be inferior to forecasts from statistical models. (c) 2005 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.