The Wisdom of the Crowd

This study tries to determine whether football matches from the English Premier League can be predicted using crowd estimated market values from the website Transfermarkt. It investigates whether the wisdom of the crowd effect can be found with the market values. Using multinomial logistic regression different models are estimated. The predictions of the market value models are compared to models based on the ELO ratings and the predictions of bookmakers. The results show that it is likely that the wisdom of the crowd effect is present and that market values can be used to predict match outcomes, but that it does not outperform ELO based models. The prediction accuracy is equivalent to that of the bookmakers.