Showing posts with label Wall St.. Show all posts
Showing posts with label Wall St.. Show all posts

  • Using Past Odds to Predict Present Results

    POSTED Mar 15, 2013 By Derek Simon

    I have often made the point that when it comes to predicting the outcome of a horse race, the betting public is among the very best. Sure, one can find individuals that outperform the pari-mutuel pools just as one can find Wall Street investors that regularly beat the market averages, but anybody who thinks that the crowd’s opinion is unimportant is likely to be scraping for bus fare after the last race.

    That said, how many bettors use the odds to their full advantage? While even the most unsophisticated punter can look at the tote board and get an idea as to the main contention in today’s race, how many players use the odds from past races as a guide to a horse’s current speed, form and class?

    Trust me, this is no trivial consideration.

    As proof, look at how recent betting favorites in the Kentucky Derby, unquestionably the biggest race for three-year-olds in America, performed in their next three starts:

    (Click on image to enlarge)


    Granted, a 3.4 percent return on investment (ROI) is not likely to get one invited to yacht parties with the rich and famous, but it’s not bad considering that the only criterion was that the horse be favored in Louisville on the first Saturday in May.

    What’s more, this kind of analysis can be extended to other types of races and is especially helpful in events and at venues where information is scarce.

    Take, for example, races from across the pond.

    In the 16.40 at Cheltenham Racecourse on Tuesday, March 12 (Champion Day of the famed Cheltenham Festival), 19 runners faced the starter for the Grade 2 David Nicholson Mares' Hurdle over two miles and four furlongs.

     Generally, a race such as this would be a tough nut for an American bloke like me to crack. However, look at how nicely the contenders come to the fore when we rank the purse values they competed for last time (a crude measurement of class), as well as the odds they offered in those contests:

    (Click on image to enlarge)


    From the chart above, it’s readily apparent that Quevega is the dominant horse in the field — an assessment made even more obvious by her odds on March 12 (she was the 8-11 favorite). Although she’d been on the sidelines for nearly a year, a quick look at the past performances revealed that the vacation would not be a problem, as the nine-year-old mare hadn’t lost since May 24, 2009 and, in fact, had triumphed numerous times off of similar layoffs in the past.

    It is equally apparent that Sirene D’ainay looks like a prime upset candidate. She was 5-2 in a race featuring a $106,000 purse last time — and she won that affair by six lengths.

    Quevega and Sirene D’ainay ran 1-2 in the David Nicholson Mares' Hurdle. The $2 exacta returned $59.60.

    Now, don’t get me wrong: I’m not advocating that one water down handicapping to a simple comparison of purse values (i.e. class) and odds, but I do think that such comparisons can help bettors get a better handle on the true contention in a race, particularly when other techniques are unavailable.

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  • Winning Without Handicapping

    POSTED Jul 5, 2012 By Derek Simon
    “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.  

    (Click on image to enlarge)

    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).

    (Click on image to enlarge)

    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.

    (Click on image to enlarge)

    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.


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