The reaction to news in live betting

TL;DR

This paper analyzes how live betting markets react to news during football matches, revealing potential overreactions influenced by cognitive biases, using high-frequency data and state-space modeling.

Contribution

It introduces a state-space modeling approach to quantify the impact of news on live betting dynamics and highlights overreaction tendencies in the market.

Findings

Markets overreact to recent news such as goals

Market response varies with match uncertainty

Behavioral biases influence betting market reactions

Abstract

Sports betting markets have grown very rapidly recently, with the total European gambling market worth 98.6 billion euro in 2019. Considering a high-resolution (1 Hz) data set provided by a large European bookmaker, we investigate the effect of news on the dynamics of live betting. In particular, we consider stakes placed in a live betting market during football matches. Accounting for the general market activity level within a state-space modelling framework, we focus on the market's response to events such as goals (i.e. major news), but also to the general situation within a match such as the uncertainty about the outcome. Our results indicate that markets might overreact to recent news, confirming cognitive biases known from psychology and behavioural economics.