Get an edge in sports betting: investing in opposing sports
Many people enjoy sports and sports fans often enjoy betting on the results of sporting events. Most casual sports bettors lose money over time, which creates a bad name for the sports betting industry. But what if we could “even the playing field”?
If we transform sports betting into a more business and professional endeavor, there is a greater chance that we can defend sports betting as an investment.
The sports market as an asset class
How can we make the leap from gaming to investing? When working with a team of Wall Street analysts, economists, and professionals, we often use the phrase “sports investing.” But what makes something an “asset class”?
An asset class is often described as an investment with a market, which has an inherent return. The sports betting world clearly has a market, but what about a source of profitability?
For example, investors earn interest on bonds in exchange for lending money. Shareholders earn long-term returns by owning a part of a company. Some economists say that “sports investors” have an inherent return built in in the form of “risk transfer.” That is, sports investors can make a profit by helping to provide liquidity and transfer risks between other sports market participants (such as the betting public and sports bookmakers).
Sports investment indicators
We can take this investment analogy a step further by studying the sports betting “market.” Like more traditional assets, such as stocks and bonds, are based on price, dividend yield, and interest rates, the sports market “price” is based on point spreads or odds of the money line. These lines and probabilities change over time, just as stock prices go up and down.
To further our goal of making sports gambling a more entrepreneurial endeavor and to further study the sports market, we collected several additional indicators. In particular, we collect public “betting percentages” to study “money flows” and sports market activity. Additionally, just when financial headlines are yelling, “Stocks are going up big,” we also track the volume of betting activity in the sports gambling market.
Sports Marketplace participants
Previously, we discussed “risk transfer” and the participating sports market. In the world of sports betting, bookmakers serve a similar purpose as brokers and market makers in the investing world. Sometimes they also act in a similar way to institutional investors.
In the investment world, the general public is known as the “small investor.” Similarly, the general public tends to place small bets on the sports market. The small bettor usually gambles with the heart, the roots of his favorite teams and has certain tendencies that can be exploited by other market participants.
“Sports investors” are participants who assume a similar role as market maker or institutional investor. Sports investors use a business approach to profit from sports betting. In fact, they take on a risk transfer role and can capture the inherent returns of the sports betting industry.
Contrary methods
How can we capture the inherent returns of the sports market? One method is to use the opposite approach and bet against the public to capture value. This is one of the reasons we collect and study “betting percentages” from several of the major online sports books. Studying this data allows us to feel the pulse of market action and to sculpt the performance of the “general public.”
This, combined with the movement of point differentiation and the “volume” of the betting activity, can give us an idea of what various participants are doing. Our research shows that the public, or “small bettors”, generally underperform in the sports betting industry. This, in turn, allows us to systematically capture value through the use of sports investing methods. Our goal is to apply a systematic and academic approach to the sports betting industry.