Odds-setters as forecasters: The case of English football

Sets of odds issued by bookmakers may be interpreted as incorporating implicit probabilistic forecasts of sporting events. Employing a sample of nearly 10 000 English football (soccer) games, we compare the effectiveness of forecasts based on published odds and forecasts made using a benchmark statistical model incorporating a large number of quantifiable variables relevant to match outcomes. The experts' views, represented by the published odds, are shown to be increasingly effective over a 5-year period. Bootstraps performed on the statistical model fail to outperform the expert judges. The trend towards odds-setters displaying greater expertise as forecasters coincided with a period during which intensifying competition is likely to have increased the financial penalties for bookmakers of imprecise odds-setting. In the context of a financially pressured environment, the main findings of this paper challenge the consensus that subjective forecasting by experts will normally be inferior to forecasts from statistical models.