Furious Pete Wrote:
-------------------------------------------------------
> I think it was in Barry Meadows very mediocre book
> "Money Secrets At The Racetrack" I read a study
> suggesting something along the lines that the
> bigger the price, the less value one would get in
> average, suggesting that the general tendency in
> the betting public is to underestimate the
> favorites chances and overestimate the outsiders
> chances. Or maybe they're just greedy, I don't
> know.
>
> This study was pretty old though and I don't know
> if it would hold up anymore, it feels like "the
> sharks and syndicates" are betting these favorites
> down more aggresively than before. Maybe
> Mathcapper have something on this?

Pete –

The favorite-longshot bias (public tends to underbet favorites and overbet longshots) has been a well-known phenomenon for quite some time, perhaps not so much so in traditional handicapping literature (although I’m sure Barry Meadow was aware of it, whether or not he mentioned it in Money Secrets), but certainly in academia. There are a whole slew of papers on the subject collected in the 1994 anthology, [u]Efficiency of Racetrack Betting Markets[/u] (re-released in 2008 to make It more accessible to laymen after Wall Street hedge funds quants bid the book up to over $1,000 a copy on Amazon). There are close to a dozen great papers on it in Part IV: Efficiency of Win Markets and the Favorite-Longshot Bias:

[url=https://www.amazon.com/Efficiency-Racetrack-Scientific-Financial-Economics/dp/9812819185]Efficiency of Racetrack Betting Markets (2008 Ed.)[/url]


As far as studies go, Steve Klein did the definitive study on the subject in The Power of Early Speed (2005), which I’ve posted about on a couple of occasions:

[url=https://www.thorograph.com/phorum/read.php?1,99648,99685#msg-99685]Re: Place Betting[/url]

[url=https://www.thorograph.com/phorum/read.php?1,97334,97368#msg-97368]On Line Travers Day Seminar[/url]


As I mentioned in those posts, you’re right, the computer guys have, for some time now, arbed most of that favorite bias away. Not only are favorites now paying less overall, but they’re winning at a higher rate as well.

How they’ve managed to do so is also detailed in the aforementioned EofRBM anthology. Essentially, guys like Bill Benter (see his report entitled, “Computer Based Horse Race Handicapping and Wagering Systems”, p. 183) have written extravagant computer programs that create their own probability lines (fair odds line) that have proven to reliably identify overlays, many of which were found among the top favorites due to the pronounced favorite-longshot bias that had been in existence.

They determine the extent of their overlays (“value”) just as you imply, by comparing their own probability lines (from their fair odds) to the public’s probability lines (tote odds), using the formula for expected value, which I’ve posted about before:

[url=https://www.thorograph.com/phorum/read.php?1,82455,82455#msg-82455]Is Kelly Dead?[/url]


Btw, for those that aren’t familiar with Barry Meadow’s [u]Money Secrets at the Racetrack[/u], the concept of creating a fair odds line to help ascertain one’s perceived value is the main focus of the book, along with tons of charts on the exotics showing the payoff you should expect for any given combination. Everyone’s entitled to their own opinion, but for my money, my dogged-eared copy of Money Secrets is one of the most important handicapping books I own, and one of the few that isn’t currently collecting dust. My only gripe is with the title itself, which sounds like something a shylark might have written to hock his latest can’t miss get-rich-quick scheme.


> Now from there you could go on to make the point
> that you think one of the things TG does best is
> to identify those live longshots, and you could
> trust them to be able to identify value for you,
> but you won't know until you run a decent study on
> it and I really, really doubt that could beat the
> takeout. You have to identify the good spots from
> the bad spots, no matter which way you look at it.


I'll have a lot more to say on this later, not so much on "live longshots", but on the concept of identifying value in general ("good spots from bad spots"), which is what the TG analyses (and of every handicapper who's worth his salt) is all about. I'm working on just such a study now from the ROTW archives - hope to have something to share sometime before the opening of the spaaaa..


Rocky R