Do Efficient Markets Exist?

Everyone understanding the fundamentals of sports betting knows that the bookmaker earns his money from the 10% commission he charges on losing bets, otherwise known as the "juice" or the "vig".  He hopefully can book equal action on both sides of the event and simply pay the winners with the losers' money and keep the rest.

Because of this, winning 50% of your games will not break even.  Instead, in order to break even laying an average of $11 to win $10, you must win 11 games for every 10 bets that you lose.  In other words, you must win 11/21 = 52.38% of your bets just to break even. 

Consequently, to determine if you would like to bet into a posted line, you must feel confident that your bet will win more than 52.38% of the time.  If you feel it will, then you have a bet and vice versa. 

This is all just the basic concept in (hopefully) winning at sports betting.

But, the idea behind the point spread is to quantify the difference in strength between two teams.  In addition to the information contained in the original line on a game, the bets that are taken throughout the week should insert more information into the line.  Once all available information has been taken into account (through initial lines and action), the point spread should theoretically be at a point where it does not matter which side you take.  If the two teams played each other 1,000 times, they would each cover the spread 500 times.....IF the point spread market is efficient.

However, we know that efficient markets are something that exist solely in economics and finance classrooms, otherwise there would not be any winning sports bettors, just as there would not be any profitable stock market investors if that market was efficient.  There will always be individual options that are under or over-valued just as there will always be investors present to exploit those differences in value.  This applies to stocks, point spreads, insurance policies and any other number of options.

As the saying goes, if markets were efficient then "a monkey throwing darts at the wall" could pick investments just as well as someone carefully analyzing data to make their decisions.  If markets were efficient, then it simply wouldn't matter what you did as you would never realize a monetary return on your investment......the only gain would be in the simple utility of what you receive in return for your capital.

To answer the question of whether someone without knowledge can break even, my friend Danny and I are going to pick every college football game every week.  Danny does not know much about the schools outside of the SEC and will take the lines every week and make his selections in the time span of about 10 minutes (or as long as it takes for him to draw 50 or so circles on a piece of paper.  In the meantime, I will continue to post my plays as I have been and we will compare Danny's results on the games that I play to my own.

Hopefully the market is as inefficient as I think it is!