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Point spreads and the mythical "balanced book"

Papers on point spreads commonly claim that bookmakers set the spread in order to "balance the book," and adjust it in order to take equal amounts of money on either side of the proposition. This is a myth. In reality, bookmakers often have a serious imbalance on either side of a game. Duke-UConn was such a game. Duhon's "meaningless" three-pointer at the buzzer rescued millions of bookmaker dollars from the Blue Devils' collapse. Here's an interesting case, from an intriguing story at ESPN:

The Duhon shot caused a $630,000 positive swing for, an online sportsbook based in Costa Rica. The sportsbook took more than 10,000 bets on the Duke-Connecticut matchup, with more than 8,000 bettors placing an average wager of $50 on UCONN to cover a 2- to 2 1/2-point spread. If Duhon didn't hit the shot and Connecticut prevailed 79-75,, which has no affiliation to the network broadcast partner, would have lost $290,000 instead of making $340,000, according to Dan Johnson, senior oddsmaker for the betting site.

When Duhon made the shot, there was an overwhelming feeling of euphoria here," said Johnson, who was in the company's headquarters surrounded by televisions. "We all jumped up in unison and that doesn't normally happen in this business.

A couple of points. If the line is right, and the outcome of the bet is 50-50,'s expected profit is $25,000 on this game. Assuming the line is correct, random plays like Duhon's shot typically settle matters, which, given the vigorish, is where the bookmakers get their edge. Bookies make their living off of garbage time. Second, although they seem suspiciously rounded, the numbers reported in the story add up. Assuming the standard 11-10 rule, they point to betting volume that was four times higher on UConn than Duke. Not balanced, not at all.

Bookies take big risks, but note: even if the public is cuckoo for UConn, the wise guys are not. If the book had raised the line to, say 3.5 to 4.5 points, smart money would have flooded in on Duke. The bookmakers would have set themselves up for fleecing, which is not their business model.

Line-setting is tricky, and there is alot of money riding on whether the line is correct. Mike Roxborough, who set the initial spread in Vegas for many years, kept a nylon rope in a plastic bag nailed to his office wall. Below it was a sign "For a Middle on Super Bowl." Books can lose to both sides (a middle) when the line moves significantly. Another reason, assuming no change in fundamentals, to sit tight and accept the risk from one-sided action in situations like the Duke-UConn game.