Question

1.What is the difference between a traditional commission agreement and a management fee agreement?
2.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?
3.If the totals market is weak-form efficient for the NBA, would researching past scoring patterns of teams lead to profitable betting strategies? Explain.

Answer 1

Answer (1) : When the finance managers of a firm or company enter in to a non-legal agreement with a broker , such that the as per the agreement, the finance managers or money managers directly pay the broker some amount of commission money to pass on a substantial amount of money to a research firm or a research institution, this is referred to as the Commission Sharing Agent( CSA). This is also called as the Client Commission Agent (CCA) in the United States. Whereas, in a Management Fee Agreement or a Management Services agreement, it is the company that directly enters in to an agreement with the individual consulting firm or an investigative firm, this type of direct agreement helps the company to save substantial amount of money in the proper implementation of its operational sectors.
Answer (2) : Semi strong form efficient market means that the market is in a situation where, the old procedures, practices and market renditions hold good in the current market structure and can also be used to somewhat predict the tentative market structure in the future. This however does not imply that all the predictions based on the history of the market structure will hold good in the future. This only means that a tentative prediction can be made, and a likely similar result can be achieved. If this is applied to the current scenario, the NFL football match is in a situation where one of the teams is in a good position and the other team is in a comparatively disadvantageous position. Since the NFL football is a semi strong form efficient structure, this means that, the prediction of the outcome of the match cannot be guaranteed, as per the past match results and performances of the players. i.e. it may so happen the team which is already dominating , will have players playing out of their skin and making some outstanding goals , thus taking the team to victory, or it may also happen that the team which is now at a slightly weaker position , may have their players playing out of their skin and providing some thriller moments and taking the game away from the other team. However, the semi strong structure would give u a rough idea that since the team which is playing better and have players in form and outperforming the other team, may end up winning the game. Or if in the past the other team has had a history of turn around, it is possible that the team may outperform the other team and create a turn around. Thus betting on the team against the point spread is a slightly dangerous bet, however, since it is a semi strong form structure, there is some likelihood that it may be a successful one. The bet on the team which has the better of the points spread is a better choice.

Answer (3) : A weak form efficient market means that the market is in a situation where, the old procedures, practices and market renditions hold perfectly good in the current market structure, they are known in the market and the factors of production are fully exhausted or utilized and cannot be used to predict or presume the tentative market structure in the future. This implies that none of the predictions based on the history of the market structure will hold good in the future. It is totally unlikely that a similar result will be achieved. If this is applied to the current scenario, the NBA match is in a situation where none of the teams is in a good position and none of the team is in a comparatively disadvantageous position. Since the NBA is a weak form structure, this means that, the prediction of the outcome of the match cannot be guaranteed, as per the past match results and performances of the players. i.e. it may so happen that one of the teams will have players playing out of their skin and making some outstanding nets, thus taking the team to victory, or it may also happen that the other team may have their players playing out of their skin and providing some thriller moments and taking the game away from the other team. It being the weak form structure, thus gives us no idea as to which team may outperforming the other team and may end up winning the game. In this case of structure, even if in the past a team has had a history of turn around, it is very less likely possible that the team may outperform the other team and create a turn around. Thus, betting none the teams is advisable. however, if the players of teams show excellent commitment and play tremendously well and change the nature of the game, it may then become somewhat evident as to which team may hold the edge. Then it may possible to strategies the bet on any of the teams.