Reinhold P. Lamb

The home field advantage revisited: a search for the bias in other sports betting markets

Abstract Recent research describes a bias in the pricing of the home field advantage in the betting market on National Football League games with a national focus (Monday night and playoff games). Home teams, especially home team underdogs, win at a rate sufficient to reject both the unbiased forecast and absence of profit opportunities versions of market efficiency. This paper extends the examination of the pricing of the home field advantage, particularly in games with a national focus, to the point spread betting market on National Basketball Association games and the fixed odds betting market on Major League Baseball games. Contrary to the football results, we find little evidence of a mispricing of the home field advantage in either regular season or playoff games in both basketball and baseball. Further, betting on all home teams is never profitable in either league. Additionally, the paper examines the latest three football seasons and finds no mispricing in games with a national focus in this out-of-sample period. We conclude that these markets are, in general, efficient.

Dividends, earnings volatility and information

It is generally accepted that a firms dividend policy can provide information about its future financial performance. Most studies link dividend policy with firm valuation; however, other signals involving dividend policy are also observed. The focus of this article is not to continue the examination of the return (valuation) information contained in dividend announcements, but rather to consider the information about risk that the announcements provide. We consider the ‘risk information hypothesis’, whereby management provides the market with new information about the risk of the firms earnings variability through their dividend policy. The results of our study provide evidence that positive changes in dividends are associated with positive future changes in mean real Earnings Per Share (EPS). Furthermore, a significant increase in EPS variance (risk) after a dividend change is observed for all dividend change classifications except for dividend omissions. The strongest signal of future variance shifts is with dividend increases.

Investor–fans? An examination of the performance of publicly traded English Premier League teams

This paper considers the game-related performance of the publicly traded teams in the English Premier League. It is found that the price behaviour of the publicly traded soccer team market to be very insensitive to game outcomes in terms of both returns and trading volume. It is believed that the results point to a new type of investor in professional sports – these investor fans do not trade on information that may affect cash flows but, rather, appear to obtain value from mere ownership.

Compliance with SEC Disclosure Requirements About Market Risk

The SEC recently introduced a new regulatory requirement that firms should provide more complete disclosure of their activities involving derivatives. For example, they must now report more complete information about the accounting treatment of their derivatives positions, as well as both quantitative and qualitative information about market risk exposure of sensitive instruments. This article describes the new reporting requirements and provides an overview of how major firms have responded in their initial submissions.

The Congressional Calendar and Stock Market Performance

This study reports on the existence of a curious calendar effect - a relationship between stock market performance and the schedule of the United States Congress. Almost the entire advance in the market since 1897 corresponds to the periods when Congress is in recess. This is an impressive result, given that Congress is in recess about half as long as in session. Furthermore, average daily returns when Congress is not meeting are almost eight times greater than when Congress is in session. Throughout the year, cumulative returns during recess are thirteen times that experienced while Congress is in session.

Don't lose sleep on it: a re-examination of the daylight savings time anomaly

A recent study finds evidence of a new financial market anomaly linking daylight savings time changes with market returns – spring and fall daylight savings time weekends are typically followed by large negative returns – and that these returns are significantly lower than regular weekend average returns. The present study finds that neither the consistency nor the magnitude and statistical significance claimed for this anomaly survives serious scrutiny.

The disclosure of information on market risk: evidence from the Dow 30

In 1997, the Securities and Exchange Commission (SEC) issued new disclosure rules in an amendment to Regulation S‐X. This release requires the disclosure of both qualitative and quantitative information about market risk by all companies registered with the SEC for annual periods ending after 15 June 1998. Larger companies, with market capitalizations in excess of

The reaction of stock returns to Department of Homeland Security threat level changes

2.5 billion, banks, and thrifts were required to apply the regulation’s provisions for annual periods after 15 June 1997. This paper presents results of an analysis of the market risk disclosures by the Dow 30 companies for 1997. The provisions of the amendment requiring the disclosure of qualitative information about market risk by were generally followed by all of the companies contained in the DOW 30. Compliance with the other aspects of the amendment was mixed. These failures might be attributed to confusion over the provisions of the amendment. The results of this study indicate that further evidence is needed on the ability of companies to follow the provisions of the amendment.

Valuation and Hedging of Sports Futures Wagers

This paper examines the impact of changes in the Department of Homeland Securitys threat levels on asset prices in the airline and insurance industries. If changes in threat levels contain new information, they would be expected to influence asset prices in one or both industries. The paper finds that increases and decreases in threat levels have no discernible effect on domestic and foreign-based airline or insurance prices. It appears that financial markets either do not view these changes as credible or view their incremental value as negligible.

A Study of Large Institutional Investor Trading Behavior Around Leveraged Buyouts

This study investigates, in a conceptual way, the intrinsic valuation of sports futures wagers and, given the absence of a viable secondary market, strategies for locking in pre-expiration value by hedging with the existing set of futures wagers, proposition wagers, and game wagers. An interesting finding is that effective hedging with game wagers generally involves games of teams other than the futures team, in addition to the futures-team’s games. The paper also shows how to use current game odds and futures odds to find the implicit projected odds on future games, conditional on the match-ups to be determined by the outcomes of current games.