Abstract
- The notion of “momentum” and its effect on the outcome of sports games has been a point of contention for decades. This paper tests if a simple betting strategy based on momentum can be used to generate a consistent profit. The momentum strategy is applied to the National Basketball Association; we examine 30 teams spanning the 2001-2013 seasons. The results show that the momentum strategy generates a significant profit over this period. The momentum strategy is often referred to as the hot hand strategy. The strategy requires betting on teams to win that are already on a hot streak of at least four games, while betting on teams to lose that are already on a cold streak of at least four games. The results show that the momentum betting strategy yields an average overall winning percentage of 56.5%, which is significantly above the 52.4% required to break-even.