Assessing the Viability of NBA Betting as a Financial Asset Class Using Predictive Modeling
Open Access
- Author:
- Scalise, Anthony
- Area of Honors:
- Finance
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Christoph Hinkelmann, Thesis Supervisor
Brian Spangler Davis, Thesis Honors Advisor - Keywords:
- Investing
Gambling
Predictive Modeling
NBA
Betting
Sharpe Ratio
Behavioral
Technical
Fundamental
Asset Class
Portfolio
Market
Behavioral Finance
Stock Market
Bias
Liquidity
Noise
Inefficiencies - Abstract:
- Since the inception of currency, human beings have searched for ways to achieve capital appreciation. While traditional opportunists typically did so by investing, adventurous speculators have allocated their capital towards wagering on sports contests. These actions, despite their apparent differences, share many common attributes; both methods incorporate portfolio construction, fundamental analysis, technical considerations, and behavioral tendencies. The recent push towards legal sports betting in the United States has led to increased liquidity and efficiency within the gambling market, making it a potentially viable investable asset class. However, line pricing discrepancies still exist that can be exploited through the use of analytics and expertise. Since the market consists largely of amateur speculators, discrepancies can be identified by eliminating the noise that influences public action. Although several sports hedge funds have tried and failed to capitalize on such inefficiencies, simplified predictive modeling can potentially produce consistently comparable results with those of the stock market. In order to develop such models, a limited and curated list of factors are considered. The NBA betting market exhibits particular potential due to its statistical documentation. Predictive modeling research looks to prove that informed, quantitative gambling can be considered a viable asset class by producing competitive results with those of a market portfolio; specifically, the model looks to achieve higher returns, a more impressive Sharpe Ratio, and minimal market correlation. The results obtained in the modeling research study are compared against 30-year historical market averages to determine the viability of NBA betting as a financial asset class.