Finding Value – A New Way

Today’s article has been written by Kieran Ward, professional gambler, tipster and betting blogger over at www.makeyourbettingpay.co.uk

Yesterday, I talked about the advantages and disadvantages of creating your own odds line. Today I’m going to look at a simpler way of identifying value.

I no longer create full odds for every race I want to get involved in. Of course, I still do it on the big races or any race I am particularly interested in figuring out but I stopped doing it on a daily basis quite some time ago now – when I realised something very important (and very profitable!).

Even though I think my own assessment of true probability is very good, there is a freely available tool out there that makes those assessments far more accurately than I ever could.

It’s called Betfair – and it’s considerably more accurate in the long term than the opinion of any one odds compiler, no matter how expert they are.

Numerous studies have shown that the horse racing markets on Betfair are exceptionally accurate predictors of true probability in the final few minutes before a race goes off, particularly at the head of the market (they are slightly less accurate on the outsiders because there is less liquidity on those runners).

One such piece of research was instrumental in making me realise just how accurate a tool Betfair is. If you are interested, you can read that piece of research at the link below:

http://www.probabilitytheory.info/content/item/15-the-efficiency-of-the-betting-exchange-markets

That research concludes, with some caveats, as follows:

“Betfair would appear to be a beautiful demonstration of the efficiency of a freely tradable market”

Why are Betfair horse racing markets so accurate?

It’s a good question! It can at least in part be explained by a phenomenon known as “The Wisdom of Crowds” made famous by the book of the same name.

“The Wisdom of Crowds” maintains that the averaged estimations of a group of people are likely to be more accurate than the single estimation of an expert.

For example, if you were to ask 1000 people to guess the weight of a cake then took the average of their answers, that average is likely to be very accurate – more accurate, in most cases, than the guess of any individual group member.

It appears that “group intelligence” almost always exceeds that of the most expert member of the group – even if the group is made up almost entirely of non-experts.

Betfair prices represent the averaged opinion of tens of thousands of punters, some of them experts, the majority not. As such Betfair prices are always likely to be more accurate than the opinion of any one individual.

Additionally, Betfair is a weighted average of those opinions because stronger opinions are given greater weight in the form of bet size.

The key thing to remember is this:

Betfair prices, in horse racing markets just before the off are, by far, the most accurate guide we have to the true chance of a horse winning a race.

Tomorrow, I will take a look at some practical uses of this key piece of knowledge.

Today's Selections

Kempton 5.05 Teen Ager – eachway bet – 13/2 Will Hill

2 Responses to Finding Value – A New Way

  1. Martin says:

    What is the difference between the “wisdom of the crowd” and everyone backing a favorite? We all know backing favorites lead to a loss but the majority of a crowd are likely to side with a favorite? Hope that makes sense.

    • Dave says:

      Hi Martin

      Thanks for your comment – you make an interesting point.

      Although, it is defintely unprofitable to blindly back favourites, the
      fact that favourites win more than any other runner, does indicate the
      wisdom of crowds quite nicely! Unfortunately the bookmakers don’t offer
      good enough prices (on average) for us to turn a profit backing them. Even
      backing them on betfair blindly would result in break even in the long
      term and a loss to the tune of your commission percentage.

      The method I’m advocating uses market indicators to identify those horses
      that will go off shorter – before they shorten to their final price. If,
      by using market analysis we spot a horse at 10/1 in the morning, that
      subsequently goes off at 7/1 with the bookmakers and at 15/2 on Betfair
      we’ve secured a fair chunk of value. If we can do that consistently, we
      are guaranteed to make money in the long term.

      It’s a case of spotting which way the crowd are heading, before they reach
      their final destination!

      Hope that helps

      Kieran

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