Identifying Optimal Tennis Betting Portfolios Based on Varying Risk Tolerances of Bettors
Open Access
Author:
Godbole, Nimay
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
Robert Alexander Novack, Thesis Supervisor Brian Spangler Davis, Thesis Honors Advisor
Keywords:
Sports Betting Portfolio Optimization Tennis
Abstract:
This thesis assesses the risk versus return relationship in tennis betting among the different tournaments that exist within the Association of Tennis Professionals (ATP) Tour, the main men’s tennis governing body. To do so, betting data is gathered from a website well-known for this data collection, http://www.tennis-data.co.uk/. The purpose of this thesis is to identify optimal betting portfolios for bettors with varying levels of risk aversion. Expected returns and standard deviations of Grand Slam, Masters 1000, ATP 500, and ATP 250 tournaments were analyzed to create an optimal risky portfolio using Markowtiz’s Portfolio Theory. Once that was created, optimal betting portfolios were created by betting a portion of the money in the tennis betting market and investing the rest in Vanguard’s Prime Money Market Fund, VMMXX. The key finding is significant; at a risk aversion level of A = 4, the portfolio yields a return of 11.02 percent and a standard deviation of 15.02 percent, which is a higher return and lower standard deviation than the historical average of the S&P 500. However, further research needs to account for a larger data set and stronger statistical analysis tools to identify even more profitable betting strategies.
