A study of a market anomaly: “White Men Can’t Jump”, but would you bet on it?

• We examine how race and market outcomes are related in basketball betting markets.
• The bookmakers set a biased, higher spread for teams with more black players.
• These teams perform worse against the spread, providing profit opportunities.
• We consider many alternate explanations, and the racial composition variable remains significant.

We identify a largely efficient market in which there is a relationship between race and market outcomes. Examining data on NBA games, we find that teams with more black players tend to face larger point spreads and that these teams perform worse against the spread. These biased outcomes are significantly large and persistent so that we are able to identify profit opportunities. We also find evidence that the biased spread is set by the bookmakers rather than being moved as a result of excessive betting on the more black team. We examine several alternate explanations, and the racial composition measures remain significant in these specifications.