Are Sports Betting Markets Semi-Strong Efficient? Evidence From the COVID-19 Pandemic

This paper examines whether sports betting markets are semi-strong form efficient-i.e., whether new information is rapidly and completely incorporated into betting prices. We use news on ghost games in the top European football leagues due to the COVID-19 pandemic as a clean arrival of new public information. Because spectators are absent during ghost games, the home advantage is reduced, and we test whether this information is fully reflected in betting prices. Our results show that bookmakers and betting exchanges systematically overestimated a home team's winning probability during the first period of the ghost games, which suggests that betting markets are, at least temporally, not semi-strong form efficient. Examining different leagues, we find that our main results are driven by the German Bundesliga, which was the first league to resume operations. We exploit a betting strategy that yields a positive net payoff over more than one month.