Bettors' reaction to match dynamics -- Evidence from in-game betting

TL;DR

This paper investigates how in-game betting behavior reflects bettors' updates of team strength perceptions during matches, using high-frequency data and state-space models to analyze dynamic sentiment and its impact on live odds.

Contribution

It introduces a novel application of state-space models to analyze real-time bettor sentiment and demonstrates how in-game dynamics influence betting behavior and odds pricing.

Findings

Bettors update their perceptions based on pre-game and in-game team strength.

In-game betting stakes are influenced by Valuing Actions by Estimating Probabilities (VAEP).

The influence of in-game dynamics on betting varies throughout the match.

Abstract

It is still largely unclear to what extent bettors update their prior assumptions about the strength and form of competing teams considering the dynamics during the match. This is of interest not only from the psychological perspective, but also as the pricing of live odds ideally should be driven both by the (objective) outcome probabilities and also the bettors' behaviour. Using state-space models (SSMs) to account for the dynamically evolving latent sentiment of the betting market, we analyse a unique high-frequency data set on stakes placed during the match. We find that stakes in the live-betting market are driven both by perceived pre-game strength and by in-game strength, the latter as measured by the Valuing Actions by Estimating Probabilities (VAEP) approach. Both effects vary over the course of the match.