Testing for Home Team and Favorite Biases in the Australian Rules Football Fixed Odds and Point Spread Betting Markets

In this article, the authors test two different kinds of bias—the favorite-long shot/favoriteunderdog bias and the home team bias—and distinguish between the two, using a distinctive feature of the Australian Football League (AFL): the fact that many games are played on neutral grounds. The authors conduct their tests by subjecting 2001-2004 data for the AFL to detailed scrutiny, using standard econometric weak-form efficiency models of point spread and fixed-odds betting markets. They reject the existence of any significant pure favorite-long shot/favorite-underdog bias in either market and demonstrate the existence of a significant bias in favor of teams with an apparent home ground advantage in games played outside Victoria in the point spread market and in the fixed-odds market during 2002, 2004, and the period as a whole. Games in Melbourne and in Geelong are free of such a bias (except for 2003 in the point spread market in Geelong). Betting simulations that attempt to exploit these inefficiencies yield modest profits.