Betting Market Efficiency in the Presence of Unfamiliar Shocks: The Case of Ghost Games During the COVID-19 Pandemic

24 Pages Posted: 15 Sep 2020

See all articles by Kai Fischer

Kai Fischer

affiliation not provided to SSRN

Justus Haucap

German Institute for Economic Research (DIW Berlin); Heinrich Heine University Dusseldorf - Department of Economics

Date Written: 2020

Abstract

Betting markets have been frequently used as a natural laboratory to test the efficient market hypothesis and to obtain insights especially for financial markets. We add to this literature in analyzing the velocity and accuracy in which market expectations adapt to an exogenous shock: the introduction of soccer ghost games during the COVID-19 pandemic. We find that betting odds do not properly reflect the effect of ghost games regarding changes in home advantage. Furthermore, we present evidence for a slow to non-existing adaption process with respect to new match results, indicating a lack of semi-strong efficiency. Based on these findings, we also identify very simple but highly profitable betting strategies which underline our rejection of the efficient market hypothesis.

Keywords: home advantage, betting market, efficient market hypothesis, ghost games

JEL Classification: G140, Z200, Z210, Z230

Suggested Citation

Fischer, Kai and Haucap, Justus and Haucap, Justus, Betting Market Efficiency in the Presence of Unfamiliar Shocks: The Case of Ghost Games During the COVID-19 Pandemic (2020). Available at SSRN: https://ssrn.com/abstract=3692914 or http://dx.doi.org/10.2139/ssrn.3692914

Kai Fischer (Contact Author)

affiliation not provided to SSRN

No Address Available

Justus Haucap

Heinrich Heine University Dusseldorf - Department of Economics ( email )

Duesseldorf
Germany

HOME PAGE: http://www.dice.uni-duesseldorf.de

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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