The use of economic theory to minimize risk in the sports betting market.

In today’s society it cannot be argued that sport does not play a massive role in most of our lives. During the 1900’s competitive sport started to develop and with this we saw the emergence of something even more ancient than this, money and sport. With the development of society and our technological developments, we have seen massive changes in how both practices are applied. Professional sportsmen are some of the richest people around today and the amounts being waged on sports outcomes a multi-billion dollar business. With this change we have seen the developments the sport betting industry is making to handle this huge demand and flow of income. These insightful and innovative ways of looking at betting in sports has lead to a new way of thinking about how sports betting should be done. When we start to look at the new betting exchanges that are becoming more and more common we see the links with the betting world and that of the financial world. Companies who have associated some economic theory to the way that they handle how they make their bets, have started to reap the dividends. With one of the strong factors being that the sports market is un-correlated to most other markets, it is starting to look like an attractive way to risk large investments against relatively little risk along with a much shorter time span till returns can be realized. With this in mind this paper shall try to apply some of the basic thoughts, principles and rational of economic thought to the 2010 World Cup in South Africa. A specific focus shall be placed on looking at portfolio theory and using the principles behind this to bet on who will win the World Cup while being exposed to as little risk as possible.