Question

If the sides market (betting on a team against the point spread) for NFL football betting is semi-strong form efficient, what does this mean?

Answer 1

Efficient Market Hypothesis (EMH) is a theory in investment where in the stock/share prices reflect all available/possible information to produce a risk adjusted excess returns which in turn makes it impossible to sell inflated stocks or purchase undervalued ones.

EMH has three forms:

A. Strong form - which states that all publicly or privately available information has been accounted for in the existing stock's price and even insider information cannot give any investor an advantage.

B. Semi-strong form - which assumes that the current stock prices adjust rapidly to all newly released public information.

C. Weak form - which assumes that past movements in price and volume of the stocks' data don't affect the stocks prices.

In betting, the terminology 'spread', is used to determine the parameters for wagering on the favorite or the underdog.

'Betting against the spread' (ATS), means one is betting on the point spread itself and not covering the spread.

Betting on a team against the point spread is a semi strong form of EMH as there are the following scenaruos - either the team will win, lose or it'll be a draw.

The betting board will adjust constantly to the bets placed for a particular time frame.

Therefore, as bets are placed, the constant keeps changing till all betting is closed.

The no. of points by which a team will win in a football game reflects semi-strong EMH.