Many people enjoy sports, and sports fans often enjoy placing bets on the results of sporting events. Most casual sports bettors lose money over time, leading to a bad reputation in the sports betting industry. But what if we could “even the playing field?”
If we transform sports betting into a more professional and entrepreneurial 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? Working with a team of analysts, economists, and Wall Street professionals, we often throw around 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 world of sports betting clearly has a market, but what about a source of profit?
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 by transferring risk between other sports market participants (such as the betting public and sports bookmakers).
Sports investment indicators
We can take this investment analogy one step further by studying the sports betting “market.” Just as more traditional assets like stocks and bonds are based on price, dividend yield, and interest rates, the sports market’s “price” is based on point spreads, or odds of winning. the money line. These lines and probabilities change over time, just like stock prices go up and down.
To further our goal of making sports betting a more entrepreneurial endeavor and to further study the sports market, we compiled several additional indicators. In particular, we collect public “betting percentages” to study “money flows” and sports market activity. In addition, just as the financial headlines shout, “Stocks Rise on Big Volume”, we also track the volume of betting activity in the sports betting market.
Sports market participants
Earlier, we discussed “risk transfer” and sports market participants. In the world of sports betting, sportsbooks serve a similar purpose as brokers and market makers in the investment 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 often places small bets on the sports market. The small bettor often bets with his heart, supports his favorite teams and has certain tendencies that other market participants can take advantage of.
“Sports investors” are participants who assume a role similar to that of a market maker or institutional investor. Sports investors use an entrepreneurial approach to profit from sports betting. In fact, they take on a risk transferring role and can capture the returns inherent in the sports betting industry.
contrary methods
How can we capture the inherent returns of the sports market? One method is to use a contrarian approach and bet against the public to capture value. This is one of the reasons why we collect and study “bet percentages” from several of the top online sportsbooks. Studying this data allows us to feel the pulse of the market action and determine the performance of the “general public.”
This, combined with the movement of the points margin and the “volume” of betting activity, can give us an idea of what the various participants are doing. Our research shows that the public, or “small rollers,” are often underperformers 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.