Many individuals enjoy sports, and sports fans often enjoy placing wagers on the outcomes of professional sports. Most casual sports bettors lose money over time, creating a bad name for the sports betting industry. But what if we could “even the playing field?”

If we transform sports betting in to a more business-like and professional endeavor, there is a higher likelihood that we will make the case for sports betting as being an investment.

The Sports Marketplace as being an Asset Class

How can we make the jump from excellent gambling to investing? Working with a team of analysts, economists, and Wall Street professionals – we often toss the phrase “sports investing” around. But what makes something an “asset class?”

An asset class is often described as an investment with a marketplace – which has an inherent return. The sports betting world clearly has a marketplace – but what about a source of returns?

For example, investors earn interest on bonds in exchange for lending money. Stockholders earn long-term returns by owning a portion of a company. Some economists state that “sports investors” have a built-in inherent return in the form of “risk transfer.” Which is, sports investors can earn returns by helping provide liquidity and transferring risk amongst other sports marketplace participants (for example the betting public and sportsbooks).

Sports Investing Indicators

We will take this investing analogy a step further by studying the sports betting “marketplace.” The same as more traditional assets for example stocks and bonds are determined by price, dividend yield, and interest rates – the sports marketplace “price” is based upon point spreads or money line odds. These lines and odds change over time, just like stock prices rise and fall.

To further our goal of making sports gambling a far more business-like endeavor, and to study the sports marketplace further, we collect several additional indicators. Above all, we collect public “betting percentages” to study “money flows” and sports marketplace activity. In addition, just as the financial headlines shout, “Stocks rally on heavy volume,” we also track the volume of betting activity in the sports gambling market.

Sports Marketplace Participants

Earlier, we discussed “risk transfer” and also the sports marketplace participants. In the sports betting world, the sportsbooks serve a similar purpose as the investing world’s brokers and market-makers. They also sometimes act in manner much like institutional investors.

In the investing world, the general public is known as the “small investor.” Similarly, the general public often makes small bets within the sports marketplace. The small bettor often bets with their heart, roots for their favorite teams, and it has certain tendencies that can be exploited by other market participants.

“Sports investors” are participants who take on a similar role as a market-maker or institutional investor. Sports investors make use of a business-like approach to make the most of sports betting. In effect, they take on a risk transfer role and also are able to capture the inherent returns of the sports betting industry.

Contrarian Methods

How can we capture the inherent returns of the sports market? One method is to work with a contrarian approach and bet against the general public to capture value. This is one rationale why we collect and study “betting percentages” from several major online sports books. Studying this data allows us to feel the pulse of the market action – and carve out the performance of the “general public.”

This, combined with point spread movement, as well as the “volume” of betting activity can give us an perception of what various participants are doing. Our studies show that the public, or “small bettors” – typically underperform within the sports betting industry. This, subsequently, permits us to systematically capture value by utilizing sports investing methods. Our goal is to apply a systematic and academic approach to the sports betting industry.