Layoff Accounts in Sportsbooks

A sportsbook is a betting platform where you can place a wager on a variety of different sports events and outcomes. It accepts moneyline, point spread and total bets. It also allows you to place multiples such as doubles, trebles and accumulators. It also takes a commission on winning bets. This is known as the vig.

In the context of the NFL, where sportsbooks have recently become legal in a number of states, the efficiency of these markets is an important issue for the public. Although several studies have reported evidence of market inefficiencies, others have reached the opposite conclusion [5]. The empirical results presented here hint at the former view, demonstrating that the median margin of victory is overestimated by the sportsbook’s point spread in some subsets of data.

To assess the impact of this overestimation, we estimated quantiles of the distributions of the margin of victory and point total for each match using heterogeneous data stratified by the relative strength of the home and away teams. The results indicate that sportsbooks overestimate the margin of victory by 2.4 percentiles or more in a substantial fraction of the matches. Wagering on these overestimated odds yields a negative expected profit, even when consistently wagering on the side with the higher probability of winning.

To mitigate these losses, a sportsbook should balance bets on both sides of the game to lower its financial risk. One way to do this is by implementing layoff accounts, which allow customers to reduce their losing bets by putting bets on the team they believe will win. Fortunately, many sportsbook software vendors offer this feature.