Reasons why the price could be wrong.
On the whole I trust my prices and believe they are competitive with those of professional odds compilers. I wouldn't be in my third year as a full-time gambler if not.
However, given this year has been horrid so far, I thought a little navel-gazing was in order. Take stock, count the wounded and bury the dead. Regroup, reload and ready ourselves for the second half of the season.
Someone wise once said he thought it was a very good practice to ask yourself the following question prior to a bet.
“In one simple sentence what it your compelling reason as to why the price is wrong?”
Here's some ideas. They overlap; some are general and some specific so inevitably some are subsets of others.Over time I will rationalise them but it's a decent starting point.
Prices are derived from a different market, but should probably be derived individually. Obvious examples:
a)The place terms from each way markets.
b) Correct score markets (which are derived from the win odds market).
The markets are difficult for odds compilers to price up well due to lack of knowledge or similar.
a) The Big Brother markets in the early days – no-one had a clue – on the first night you could arb all evening on different prices. Three years in and the prices were 'accurate' within 20 minutes of the end of the first show.
b) The place market is very complicated to get a handle on. There will be some people with very accurate prices but the suspicion remains that the win market prices continue to have too much influence on the place prices.
c) The odds compiler is running a market they are not expert in – minor sports or leagues do not have the same dedictaed expertise as mainstream sports.
Changing circumstances
a) change of going prior to a meeting or race
b) anticipating the eventual make-up of a race ante post and its effect on prices (eg changing each way terms, likely non runners)
c) form within meetings – eg trainer/jockey form; draw and pace bias.
Balancing Books
a) the initial prices are broadly right, but a late steamer causes other prices to lengthen.
b) balancing in-running books – eg a league title book – where bookies may make a short-term conscious decision to get a team in the satchel simply to do a bit of internal accounting.
Momentum Trading
a) The fluctuations in betfair late are often to do with people reacting to the movement of a price – positive and negative – and so accentuating the situation. The initial fluctuation may well have had merit but the momentum is probably an overreaction
Overreaction to one negative or positive
a) A horse is carrying a penalty and it will be difficult to win with it. Plenty of commentators have mentioned this and the vibes are bad. No-one wants to back it, and plenty of part-timers want to lay it. It drifts to a big price. But the initial price had already at least partly discounted its chances on the basis of that factor.
b) team news in football.
c) jockey changes
Rumours creating bullish or bearish market reactions
a) manager markets!
Bias
a) Patriotism
b) big team bias and big trainer bias, and overlooking small teams and small stables
b) lady jockeys
c) Richard Hills
d) Popular horses/golfers etc who haven't really got their conditions in this event but people want to 'support' anyway, (and odds compilers are aware of this).
Hedging – many traders believe in taking a profit without due regard to the price at which they are trading out. This can provide opportunities for value bets that help them to trade out.
a) Golfers – a popular golfer is well backed pre-tournament and is two shots clear with a round to play. People want to take out some insurance.
b) Any similar long-term event.
Chaos – usually caused by volatility in-running when odds compilers struggle to keep up with the changes and ascertain true prices.
a) all in-running sports
Greed – betting against the people desperate to win at any odds
a) in-running the general rule is an over anticipation of success and a tendency to chase prices down too far.
b) illiquid markets offer opportunities to encourage impatient people to take poor prices.
c) there are opportunities to tempt people with prices – particuarly drunks overnight, in slow moving longer-term illiquid markets.
Over-reaction/Under-reaction to either the facts or the potential.
a) overrated – what a horse may achieve; under-rated what it has already achieved
b) Overrated - a horse that wins a big race as well-backed favourite.
c) recency effect - underrated - a horse that fails when a short price for a big race – now scorned by punters talking through their pockets - “always forgive a horse one failure”.
d) overrated – the last couple of performances of a football team
I intend to include this question as a final qualifier to my decision-making. I'll also add the factors as new measures of performance to my spreadsheets. At the least it's a small new addition that should refresh my weary bones.
Awesome Tooting, bloody awesome! These comments have given me some food for thought.. Tried to add something meaningful, but you just about covered all the reasons why there may be a difference between a personal tissue and “the great unwashed” if your handicapping methods are solid! Well done!
ReplyDeleteCheers toad.
ReplyDeleteIt's been worthwhile doing that - cleared my head nicely!