The Problem with Point Spreads

I’ve written before that football point spreads aren’t too different from stock prices. The point spreads are merely set by the bookies so they can have even money on both sides of the bet. They’re not trying to predict the games. They’re trying to estimate how others will predict the game. That’s very close to how stock prices work.

One of the problems in the betting market is that a team doesn’t care how much it wins by, as long as they win. Outside of pride, the teams are indifferent (we hope) to point spreads.

Sunday’s game between the Steelers and Chargers was a big headache for folks in Las Vegas. On the surface, the Steelers won a tough game by the score of 11-10. By the way, that was the first game in NFL history to have that final score (one touchdown and extra point, one safety and four field goals).

The Steelers were favored to win by four points. On the final play of the game, with the Steelers up 11-10, Troy Polamalu grabbed a loose ball and ran to the end zone to give the Steelers an apparent 17-10 lead—and covering the spread.

The officials, however, overturned the touchdown saying the Chargers made an illegal forward pass. The Steelers, naturally, didn’t care since the game was over and they won. The league later admitted the mistake. There could have been as much as $10 million riding on that decision.

Here’s the final play of the game:

Posted by on November 18th, 2008 at 1:21 pm


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