Winning Without Handicapping

“Put your money where your mouth is” has been a rallying cry for gamblers since time immemorial. Basically, it means if one is so confident about whatever it is they are asserting, they should put some money down — they should bet on it.

Many horseplayers think along similar lines. They will pass (I tried that once in 1992) or bet less money on races they are less sure of and wager with gusto on the events they like.

This got me wondering: Is it possible to determine the efficiency of pari-mutuel odds based solely on the relative handle?  

That speculative markets like pari-mutuel pools are generally efficient is hardly arguable. In fact, on Wall Street, there’s a name for it: the Efficient Market Hypothesis (EMH for short). Formulated in the early 1960s by Eugene Fama, a professor of finance at the University of Chicago Booth School of Business, EMH asserts that speculative markets reflect all that is known and can be analyzed, while rapidly assimilating new data on various traded assets. In racing parlance, this means that each horse in a race is, for the most part, fairly priced.

Again, let me stress that we are talking in generalities here. Obviously, Wall Street traders and racetrack gamblers encounter underlays (overvalued horses/financial instruments) and overlays (undervalued horses/financial instruments) every day. That said, those of us who are honest, i.e. not in politics, know that the concept of value betting is much tougher in practice than in theory.

But what if the pools themselves could tell us how predictable a particular race was? What if we knew in advance — without even handicapping — whether a particular steed was a good or bad favorite?

Well, based on my preliminary research, we can.

I examined the June 30 and July 1 result charts from nearly every thoroughbred track in North America with one simple goal: to find out if the money wagered on a particular race was an indication of that contest’s efficiency or predictability. Specifically I looked for the one event on each card that generated the highest straight pool (win, place and show) handle. I then recorded the odds of each winner and noted whether or not it was the favorite.

Here’s what I found:

Races: 64

Winning Favorites: 32

Rate: 50.0%

Return: $134.30

ROI: +4.92%

Median Win Price: $6.80

50 percent winners and a positive ROI… think about that for a second. And while you’re still on the toilet (hey, it’s where I do my best thinking), remember that, on average, favorites win only about a third (33.3 percent) of the time and produce a return of just 85 cents on each dollar wagered (-15 percent ROI).

What’s more, the races in my study ran the gambit — from graded stakes events to lowly maiden claimers. At Monmouth Park on June 30, for example, there were two stakes races — the kind of high-purse races we bettors supposedly flock to — on the card, yet it was the fourth event of the day, a lowly maiden claiming affair, that generated the most interest among punters.  

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Field size didn’t always matter either, as was proved at Emerald Downs on July 1, when the fourth race, consisting of seven betting interests, produced a larger handle than the second race (eight entrants), third race (10 entrants) and sixth race (nine entrants).

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Interestingly, the third race was comprised primarily of first-time starters, which adds credence to the thesis that the handle reflects bettor confidence and, as a result, the efficiency of the odds.

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Now, clearly, more research needs to be done, but the initial implications of this study are stunning. If it’s true that more wagering leads to more formful results, it would seem that the opposite might also hold true — that less wagering leads to more chaotic results.

Also, rather than focusing on the race with the highest handle of the day as I did (which is an after-the-fact observation), one might instead establish handle “pars,” averages to help one determine unusually heavy or light betting activity. Armed with such knowledge, players could spot efficient and less efficient betting markets with relative ease.

The possibilities, it seems, are endless.


Weekend Win Factor Plays

Coming soon.