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There will be an interesting test of the free market this weekend. The best team in the NFL, the New England Patriots, is playing the worst team, the Miami Dolphins (although the Rams may challenge that title before the season ends). The game is in Miami.

I find these things interesting because a point spread is no different from how the stock market works. It’s the judgment of the free market. The point spread for the game is 17 which is about as high as you’ll ever see for an NFL game. Many years ago, you could see games with over 20 points but those days are long gone.

Still, 17 points seems on the low side. New England’s worst game this year was a 17-point win. I also noticed that the Tradesports contracts to cover are up 53%. Perhaps the line will move. I wonder if the odds makers are simply afraid of an event that appears to be at the margins.

The question comes up in finance too. Basically, how do you handle a rare event? There just isn’t that much data to analyze when two teams like this meet. For now, the market seems to have selected caution. But how will sophisticated investors (gamblers) handle this?

Posted by edelfenbein at October 17, 2007 11:03 AM