Economics in Action

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Economists at Nottingham University Business School and Nottingham Trent University claim to have found a way to beat the bookies and make money out of spread betting.

In a paper presented at the Royal Economic Society’s Annual Conference, Dr David Paton and Dr Leighton Vaughan Williams show that punters can take advantage of different odds quoted by spread betting companies.

The two economists investigated returns to spread bets on one of the most popular markets, the number of bookings points in Premier League football matches. Dr Vaughan Williams explained:

‘Punters using the system pinpointed by our research would have won in more than 60% of matches examined over the last two seasons. The key to the system is identifying those cases where one bookmaker is offering prices out of line with their competitors.’

The possibility of betting arbitrages – buying high with one company and selling low with another to make a sure profit – has long been well known to punters. But such cases are increasingly difficult to find and spread bookmakers are known to restrict the amount of money that can be bet when an arbitrage position is open.

The two economists describe cases where companies offer prices that are different but not necessarily far enough apart for an arbitrage as Quasi-arbitrages or Quarbs. Dr Paton commented:

‘Quarbs are more common than true arbitrages, and spread bookmakers are much less likely to restrict the number of bets on them. Although betting on a Quarb does not guarantee you a profit, we found 140 cases during the last two Premier League seasons. Of these, 86 would have been winning bets and only 50 would have lost. A punter staking a modest £5 per point in each case would have won almost £5,000 over the two years.’

Despite the good news for punters, Dr Vaughan Williams adds a cautionary note:

‘Our research shows that, by betting sensibly, punters really can turn the odds in their favour. But they should remember that spread betting is notoriously volatile and it is possible to lose a lot of money in a short period of time.’

Notes

Quarbs and Efficiency in Spread Betting Markets: Can You Beat the Book? by David Paton and Leighton Vaughan Williams was presented at the Royal Economic Society’s 2002 Annual Conference at the University of Warwick.

Paton is Senior Lecturer in Industrial Economics, Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham; Vaughan Williams is Head of Economics Research, Department of Economics and Politics, Nottingham Trent University, Burton Street.

For Further Information contact Romesh Vaitilingam on 07768-661095 (email: romesh@compuserve.com)

Related information

You can find other publications by these authors, related research and citations from IDEAS and you can search for more Internet resources on the topic of Gambling on SOSIG.

Economics in Action is a collaboration between the Royal Economic Society, the Economics Network of the Higher Education Academy and SOSIG, the Social Science Information Gateway. It forms part of the Why Study Economics initiative.

This entry was posted on Monday, March 13th, 2006 at 9:17 am and is filed under Economics of Risk, Sport. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.