Swing and a Miss: Uncovering Behavioral Biases in MLB Betting Markets

Abstract

Sports betting is a rapidly growing industry, gaining attention from sports fans, professional investors, and academia. Its attractiveness not only lies in the excitement about sports and potential rewards from betting itself, but also because it serves as a ground to study risk-taking and irrationality. This thesis investigates two of the most widely discussed biases, the favorite–longshot bias and momentum, within the MLB betting market. Using moneyline and run-line odds, as well as the evolution from opening to closing lines, we analyze whether these behavioral patterns persist in pricing and whether they offer exploitable trading opportunities. Our findings show that the favorite–longshot bias is clearly present in opening odds but disappears in closing odds, with stronger effects observed in home games. Momentum affects how teams are assigned to favorite or underdog categories, yet the market efficiently prices streak-related information. Similar patterns emerge in run-line markets. Although certain momentum-based signals appear promising for systematic betting, their economic value is too small to overcome transaction costs such as the bookmaker’s vig. Overall, this thesis provides a variety of evidence that the favorite-longshot and momentum bias are present in baseball betting markets, and that they stem from biases in bettor behaviors.