Sport betting markets, much like financial markets, contain mixed beliefs on whether or not they are efficient. The purpose of this thesis is to test market efficiency in the National Football League point spread market. In addition, this study explores the theoretical implications of a sports wager on a bettor’s expected profit. The relationship between the efficient market winning percentage and the break-even winning percentage is constant with any given probability of a push. Data from the 2008-2009 through the 2012-2013 NFL regular seasons show that market inefficiencies exist; and as a result, promote long-term strategies where a profit is expected.
This thesis applies the theory of rational addiction to sports gambling. Based on this theory developed by Gary Becker and Kevin Murphy, this thesis will attempt to show evidence that gambling on sports is an addictive behavior by seeing if past and future consumption of sports gambling has an effect on current consumption while accounting for other variables. Using two data sets on the amount of money bet monthly on football and annually on the Super Bowl, this thesis runs OLS and two-stage least square regressions of amount of money bet on the independent variables to see if a correlation exists. The results of these regressions show that both past and future consumption have a positive and significant relationship with current consumption in the overall football market but is not significant with the Super Bowl data set. However, the price variable for the overall football market was insignificantly positive, while the same variable was insignificantly negative in the Super Bowl data because of the alignment of the losses and bets variables.