How efficient is the European football betting market? Evidence from arbitrage and trading strategies

This paper assesses the international efficiency of the European football betting market by examining the forecastability of match outcomes on the basis of the information contained in online and fixed odds quoted by six major bookmakers. The paper also investigates the profitability of strategies based on: combined betting, simple heuristic rules, regression models and prediction encompassing. The empirical results show that combined betting across different bookmakers can lead to limited but highly profitable arbitrage opportunities. Simple trading rules and betting strategies based on forecast encompassing are found capable of also producing significant positive returns. Despite the deregulation, globalization and increased competition in the betting industry over recent years, these predictabilities and profits are not fully consistent with weak-form market efficiency.