Sports Wagering as an Investment
July 17, 2018 at 11:24 am
I have never played a casino game or bought a lottery ticket. I do not bet on anything where I don’t think I have the odds in my favor. That is what attracted me to sports wagering 30 years ago. I was successful at it in both football and basketball but gave it up for lifestyle reasons. See "Lessons Learned from Sports Wagering".
In 2017 I decided to take another look at sports for several reasons. First, I knew sports wagering would become legal in the U.S. (See here for the up-to-date legal status of U.S. sports wagering.) There is also more data available now for developing and testing strategies. Furthermore, I suspected some of the behavioral biases discovered in the 1990s would also apply to sports betting.
I also thought sports wagering could provide good diversification owing to its lack of correlation with traditional investments. Finally, I thought I could apply the portfolio management skills that I have acquired over the past 30 years. Proper bankroll management is essential for long-run success with any investment, including sports wagering.
I reviewed all the academic studies I could find on sports wagering and betting anomalies. Then I went to work on the data. I developed over 200 rules-based systems in all sports. I had good results in 2017 and mediocre results in 2018 due to overfitting the data. Back in the 1990s, I had no choice but to use simple models when we had to test them manually. Now that I have simplified the models and cut their number in half, the results are good again.
What makes sports wagering particularly attractive is its lack of correlation with traditional investments. From a portfolio point of view, sports wagering is an ideal diversifying investment. It is also a lot more enjoyable than watching stocks and bonds fluctuate. So let the games begin!