Testing for Home Team and Favorite Biases in the Australian Rules Football Fixed-Odds and Point Spread Betting Markets

In this article, the authors test two different kinds of bias—the favorite-long shot/favorite-underdog bias and the home team bias—and distinguish between the two, using a distinctive feature of the Australian Football League (AFL): the fact that many games are played on neutral grounds. The authors conduct their tests by subjecting 2001-2004 data for the AFL to detailed scrutiny, using standard econometric weak-form efficiency models of point spread and fixed-odds betting markets. They reject the existence of any significant pure favorite-long shot/favorite-underdog bias in either market and demonstrate the existence of a significant bias in favor of teams with an apparent home ground advantage in games played outside Victoria in the point spread market and in the fixed-odds market during 2002, 2004, and the period as a whole. Games in Melbourne and in Geelong are free of such a bias (except for 2003 in the point spread market in Geelong). Betting simulations that attempt to exploit these inefficiencies yield modest profits.