Journal
JOURNAL OF FORECASTING
Volume 28, Issue 1, Pages 55-72Publisher
JOHN WILEY & SONS LTD
DOI: 10.1002/for.1091
Keywords
sports forecasting; prediction markets; combined forecasts; rule-based forecasts
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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. Copyright (C) 2008 John Wiley & Sons, Ltd.
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