What Can Investors Learn from Sports Betting? | The Informed Investor 23

Episode 23: Are there any connections between betting on sports and investing in stocks?

Obviously, investing is not the same as placing a bet on your favorite team. For most people, after all, investing is usually a long-term endeavor.

But you might be surprised to learn how the betting lines that drive wagering in sports are not unlike prices set by buyers and sellers in securities markets.

Point spreads set by sportsbooks are largely based on all available information about the teams competing in upcoming games and the athletes who are expected to play.

Similarly, research shows that stock prices in public markets are largely based on all available information about publicly traded companies as well as economic metrics and geopolitical trends.

The outcome of any upcoming game is always in doubt because the game hasn’t been played. Likewise, the future price of a stock is never known in advance.

However, betting lines and market prices typically offer reasonable estimates of fair value.

What does that mean, exactly? It means lines and prices are set at levels that will attract bettors and investors, respectively, regardless of their beliefs about the future.

Then, when new information becomes available, those lines and prices frequently change so that bettors and investors will keep coming back.

In this sense, markets are always working, whether it’s a betting market or a securities market.

In Episode 23 of the “The Informed Investor” podcast, Dimensional’s Mark Gochnour, Head of Global Client Services, Wes Crill, PhD, Senior Client Solutions Director, and Jake DeKinder, Head of Client Communications, suit up and “show out” for a revealing discussion on sports betting and markets.

TIME STAMPS

00:00 Intro

00:43 How does the market set prices?

02:03 The headlines

02:59 What’s the connection between point spreads and markets?

03:57 Are points spreads and market prices accurate?

05:20 Boise State vs. Notre Dame point spread vs. outcome

06:30 Fresno State vs. Boise State point spread and outcome

07:02 Technology sector vs. broad market

07:31 How often do favorites beat the spread?

08:09 How should you react to unexpected outcomes?

09:29 Money spent on betting versus investing

11:08 What do market prices reveal about expected returns?

12:30 Key takeaways


LINKS FROM TODAY’S EPISODE:

The “Grumpy Economist” on Growth, Tariffs, and the Fed WITH JOHN COCHRANE https://www.youtube.com/watch?v=KrOnqG0t-z4

“The Informed Investor” on YouTube https://www.youtube.com/playlist?list=PLCyJr6FFig-h1mA7rVP7Mbk0irFw2wA90

Dimensional Fund Advisors Shorts on YouTube https://www.youtube.com/@dimensionalfundadvisors/shorts

Mark Gochnour on LinkedIn https://www.linkedin.com/in/mark-gochnour-9a23598a/

Wes Crill on LinkedIn https://www.linkedin.com/in/wes-crill-77a49417/

Jake DeKinder on LinkedIn https://www.linkedin.com/in/jake-dekinder-cfa-4105b98/

Learn more at https://www.dimensional.com/

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