The Effect of Momentum on the NBA Point Spread Market

Authors: Thomas T. Byrnes (1) and Joseph Anthony Farinella, Ph.D.*(2)

(1) Thomas Byrnes is a graduate from the Honors College at the University of North Carolina Wilmington. Mr. Byrnes is currently working as a financial advisor. 

(2) Joseph Farinella is an Associate Professor of Finance at the University of North Carolina Wilmington. Dr. Farinella is also a Chartered Financial Analyst and consultant.

*Corresponding Author:
Joseph Anthony Farinella, Ph.D.
University of North Carolina Wilmington
Department of Economics and Finance
601 South College Road
Wilmington, NC 28409
farinellaj@uncw.edu

ABSTRACT
The notion of “momentum” and its effect on the outcome of sports games has been a point of contention for decades. This paper tests if a simple betting strategy based on momentum can be used to generate a consistent profit. The momentum strategy is applied to the National Basketball Association; we examine 30 teams spanning the 2001-2013 seasons. The results show that the momentum strategy generates a significant profit over this period. The momentum strategy is often referred to as the hot hand strategy. The strategy requires betting on teams to win that are already on a hot streak of at least four games, while betting on teams to lose that are already on a cold streak of at least four games. The results show that the momentum betting strategy yields an average overall winning percentage of 56.5%, which is significantly above the 52.4% required to break-even.

KEYWORDS: Sports wagering, Market efficiency, Momentum
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