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Seminars

Lessons Learned from FIFA World Cup 2006 Betting Markets

Date: 12-07-2006
Start Time: 1:30pm
End Time: 2:30pm
Speaker: Jan Vecer, Department of Statistics, Columbia University
Location: Mudd 303

Abstract

Betting markets on FIFA World Cup 2006 related events reached unprecedented efficiency and liquidity. It was possible to buy and sell futures type contracts on the outcome of the game or the number of goals scored, and trade them even during the actual game. Prices of all the traded events (win, draw or loss of a given team; or number of goals) were immediately influenced by a goal or a red card. One can view a goal or a red card as a credit event which affected the prices of the traded contracts, essentially upgrading some of them, and downgrading others. As opposed to markets which trade credit risk, soccer games experience rather high and frequent number of credit events. Thus the betting market on soccer games can serve as an interesting parallel to credit markets, revealing some psychological factors which influence the traders.

We analyze data provided by tradesports.com to estimate the market implied scoring intensity of a given team as the game progressed. This can be viewed as the intensity of upgrading or downgrading the traded betting contracts. We observe that after a goal or a red card, the market experiences several minutes of price turmoil when some of the contracts are mispriced. After the market settles in the post-goal period, the implied intensity of the scoring team typically drops down, while the intensity of the second team is typically unchanged. This could be partially explained by the fact that the scoring team may want to start playing more defensively, but this effect is seen even in situations when the scoring team has an incentive to score even more goals (for instance when still trailing behind the other team). The red card effect is more complex and depends on the individual situation, but it is typically followed by both a decrease in the scoring intensity of the penalized team, and an increase of the intensity of the opponent team.

We also quantitatively define the concept of fairness and excitement of a soccer game. Fairness can be measured by probability that the better team wins (or does not lose the game), while the excitement can be measured by the first variation of the winning probabilities. Dramatic changes in the winning chances make the game more exciting.

This is a joint work with Tomoyuki Ichiba and Mladen Laudanovic.

Bio:

Jan Vecer is Associate Professor in the Department of Statistics at Columbia University. He works in the areas of mathematical finance and applied probability.