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OPINION

Momentum everywhere

Momentum everywhere
October 30, 2015
Momentum everywhere

"Bettors follow momentum signals" concludes the University of Chicago's Tobias Moskowitz in a new paper. He studied thousands of bets on four different American sports and found a pattern. Investors back teams that have done well recently, with the result that prices of bets on those teams eventually rise too much. This generates profits for early backers who sell their bets before the game, but losses for those who buy overpriced bets just before the match.

You might wonder why you should care about gambling on American ball games. Simple. There are countless possible anomalies in financial markets, which means that if you look hard enough you'll see all sorts of patterns that might enable you to make money. The problem is, though, that these might be just one-off statistical artefacts that cannot be relied upon to persist. Campbell Harvey of Duke University warns: "Most claimed research findings in financial economics are likely false."

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