Sports Betting and the Sportsbook
A sportsbook is a place where gamblers place their wagers on sporting events. Sportsbooks make money by accepting bets on both sides of a game, and by collecting the funds from losing bettors and paying those who win. This commission is known as vigorish. Despite being a highly profitable business, sportsbooks are regulated and must abide by gambling laws. In addition, they must provide a safe environment and enforce responsible gambling measures.
Successful bettors understand how betting odds work. The odds are a representation of the probability of a particular event and determine how much money a bet will payout. The top U.S-based sportsbooks feature American odds, which show how much a winning $100 bet would return, and decimal odds that indicate the total return (including the original stake).
In this paper, we employ a statistical framework to study optimal wagering on sports games. By modeling the relevant outcome variable as a random variable, we derive a set of propositions that convey the answers to key questions posed by astute sports bettors. These propositions are complemented by empirical results that instantiate the derived optimal wagering strategies and shed light onto how closely sportsbook prices deviate from theoretical optima.
To assess the accuracy of sportsbook point spreads, we analyzed a large stratified sample of matches in which the margin of victory was modeled as a random variable th. Then, for each match, we estimated th’s distribution using kernel density estimation to overcome the discrete nature of the margin of victory, and then compared it to the point spread proposed by the sportsbook.