How football explains economics

A group of economists in England used a football betting market to help them understand the speed markets digest information. They found it to be efficient, with betters reacting to goals immediately (which they showed by looking at bets after goals that happen right before before halftime and the resulting movement, or lack thereof, during the break). While they admit it’s not a perfect test, “Still, the old adage that one should buy on the rumour and sell on the news seems vindicated; new information is incorporated into prices too quickly to allow most traders the opportunity to profit.”

April 30, 2008