Errors in Expectations : Evidence from Sports Betting

Beliefs should be affected more strongly by reliable information. We test this notion using beliefs inferred from the odds offered by professional bookmakers for men's tennis matches, exploiting exogenous variation in information reliability related to whether a tennis match is played in a long or short format according to tournament regulations. We find that bookmakers' beliefs do not fully reflect information reliability, which reduces their profitability. Various robustness checks, including a placebo test with women's matches where no variation in match length occurs, support our conclusions. Our results show that information reliability neglect biases the expectations of sophisticated economic agents