The following is the abstract from the paper “Using the NFL Gambling Market as an Alternative Asset Class” by Kevin Meers, Sam Waters, and Zack Wortman. Please find the full paper here. We will publish our projected probabilities each week before NFL games begin, starting for Week 2.
A particular focus of modern portfolio theory involves diversifying risk through identifying and investing in assets that are uncorrelated with one another. In this pursuit, many investors have explored so-called “alternative asset classes” that are not traded on major stock markets. In this paper, we identify the market for gambling on games in the National Football League (NFL) as one such alternative asset. By modeling various betting outcomes, we develop multiple betting algorithms that provide returns from 7% to 20%, depending on what level of risk the investor would like to assume. These returns are, in theory, totally uncorrelated with market risk, and therefore valuable to any portfolio manager; further, they appear to dominate multiple market indices.