Ciobanu, Robert
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Publication Profitability in Sports Betting: A Case Study of Men's Tennis(2023-01-01) Ciobanu, RobertThis paper evaluates the feasibility of profit generation through sports betting. While sports gambling represents a large and rapidly growing economic sector, few bettors are actually profitable and there is limited evidence of successful publicly available strategies. We investigate how such a strategy can be built for the game of men’s tennis. Our methodology for creating a strategy consists of two components. First, it includes a predictive analytics component, in which we combine a large number of observable player, match, and tournament characteristics in order to estimate the probability of either player winning the match. We study both linear and non-linear multivariate combination approaches. Second, our methodology contains a financial strategy component, in which we focus on using money allocation techniques to achieve optimal returns. Through statistical simulations and back-testing, we find that it is possible to generate positive expected profits at sustainable levels of risk, with both formal and informal strategies. Interestingly, we also establish that building a successful strategy does not necessarily require the bettor’s model to have higher predictive accuracy than the betting markets. Instead, bettors can focus on a narrow segment of matches (for example “upsets” – i.e., matches in which the lower-ranked player wins) and outperform the market in that segment alone. We conclude that sports betting can be used as a profitable investment vehicle. Beyond tennis, these techniques can be applied to most other sports, especially those for which large volumes of historical data are publicly available.