Point Shaving in the NBA: An Economic Analysis of the National Basketball Association’s Point Spread Betting Market

In this paper, I examine the point spread betting market of the National Basketball Association for indications of cheating through point shaving. Previous studies have illustrated the contradictory phenomenon of simple, profitable betting rules persisting in a market of informed traders. While normally dismissed due to the salaries earned by professional players, I propose point shaving as an explanation for this persistent market inefficiency. Through analysis of the distribution and symmetry of the forecast errors, I arrive at a rough approximation of point shaving’s prevalence. In studying in–game scores, I find conclusive evidence that the point spread influences game outcomes and has causative effects on the probability of the favored team covering the point spread. The key economic concept these results support is that with the non–linear payout structure of the point spread betting market creating a discontinuity over the value of final game margins, individuals are altering their behavior in response to these distorted incentives.