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IMA Journal of Management Mathematics Advance Access originally published online on November 5, 2008
IMA Journal of Management Mathematics 2009 20(2):167-184; doi:10.1093/imaman/dpn028
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© The authors 2008. Published by Oxford University Press on behalf of the Institute of Mathematics and its Applications. All rights reserved.

This article appears in the following IMA Journal of Management Mathematics issue: Special Issue Mathematics in Sport [View the issue table of contents]

Markowitz portfolio theory for soccer spread betting

Alistair D. Fitt{dagger}

School of Mathematics, University of Southampton, Southampton SO17 1BJ, UK

{dagger} Email: a.d.fitt{at}maths.soton.ac.uk

Received on 16 August 2007. Accepted on 30 July 2008.

Soccer spread betting is analysed using standard probabilistic methods assuming that goals are scored in a match according to Poisson distributions with constant means. A number of different possible forms of ‘edge’ (betting advantage) is identified. It is shown how the centre spreads of the more common bets in the ‘bet universe’ may be calculated. A more general question is then addressed, namely, how a punter should invest if they take a view that the online bookmakers have fixed the goal means incorrectly or some other edge is in their favour. It is shown that a Markowitz portfolio theory framework may be set up in such cases. This leads to the definitions of an ‘efficient betting frontier’ and an ‘optimal bet portfolio’. Examples are used throughout to illustrate the theory that is developed.

Keywords: spread betting; portfolio theory; soccer betting; arbitrage; sports betting


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