When the league table lies: Does outcome bias lead to informationally inefficient markets?
Raphael Flepp, Oliver Merz and Egon Franck ask whether outcome bias persists in markets where participants have financial incentives to decide well. Using European football match data and a betting exchange, they test whether noisy match results are correctly reflected in prices. Prices overestimate the winning chances of teams that have outperformed their expected goals and underestimate those of teams that have underperformed, and betting returns follow the same pattern. The authors conclude that competitive market mechanisms do not fully erase outcome bias.
Raphael Flepp, Oliver Merz and Egon Franck ask whether outcome bias persists in markets where participants have financial incentives to decide well. Using European football match data and a betting exchange, they test whether noisy match results are correctly reflected in prices. Prices overestimate the winning chances of teams that have outperformed their expected goals and underestimate those of teams that have underperformed, and betting returns follow the same pattern. The authors conclude that competitive market mechanisms do not fully erase outcome bias.
Written from the abstract read 2026-10-22 via IDEAS.
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doi:10.1111/ecin.13163. Read at the level of the published abstract.