You can spend a lot of time studying the form. I know of at least one leading racing tipster who practically leads a nocturnal existence by spending all night analysing the form of the runners for the following days racing. There are no doubt countless other professional and semi-professional punters who follow the same lifestyle in order to make their racing pay. I have certainly been part of this group from time to time, but in recent years, with the arrival of two young children, sleep has become more of a priority! I have therefore looked at short cutting the selection process by developing systems that use the betting market as a guide to winners.
The betting market is a good short cut because it basically reflects the views of the thousands of punters and bookmakers who have bothered to study the form. As a general guide the betting market is not too far off the mark, and the odds on offer closely match the actual statistical probabilities of a horse making it into the winners enclosure (see Figure 1).
Figure 1 pays for careful consideration. Basically it shows the relationship between the betting markets assessment of a horse’s chances and the actual probability of the horse winning.
The Starting Price (SP) betting odds have been converted into statistical probabilities To give you an example an even money chance (1/1) is assumed by the market to have a 50 per cent probability of winning. A 2 to 1 shot would be said to have a 33 per cent chance of success because the bookmakers are basically saying that in every three races a 2 to 1 shot will win one race and lose two.
The betting market probabilities have then been compared to the actual probability of a win. These ‘actual probabilities of a win’ are simply the proportion of winners recorded in all flat races run from 1994 to 2007 in Great Britain and Ireland for horses at different betting odds. This gives a sample of over 700,000 runners, which allows for robust comparisons to be made.
The first interesting thing to note about Figure 1 is that the solid line represents a perfect relationship between the betting odds and the actual probabilities. This would reflect the ‘fair odds’ i.e. the betting odds represent the true probability of a horse winning. However the dots, which are the real observations, are mostly below this line. This means that the betting market odds overstate the true probability of success. For example, even money shots, in a fair market, should win 50 per cent of all their races. In actual fact even money shots only win 46 per cent of their races. The difference shows that the bookmakers build into their odds a margin, which means that the odds are stacked in their favour. This to me illustrates just how difficult it is to make a profit betting on horses. In my view you will only win in the long run by getting value, and by this I mean that the true odds of a horse winning need to be higher than the odds offered by the bookies. In other words you need to be striking bets at even money on horses’ that have a 60 per cent chance of winning.
The favourite-longshot bias
The other interesting thing about Figure 1 is that while generally the market odds offers poor value in relation to the actual odds of winning, there is value to be had in backing short priced odds-on favourites. This is what is called the favourite-long shot bias.
Basically very short priced favourites are more likely to win than the odds suggested by the market, while longer priced runners are much less likely to win compared to their betting odds. This situation seems to come about because there is a price below which most punters are not prepared to bet. To give an example a horse originally priced up as a 1 to 7 shot would attract very little money in the market. Most punters will simply ignore favourites at this price and will focus on betting on the longer priced runners in the hope that the favourite will get beat. This can create a bit of value around short priced favourites because their odds tend to lengthen because bookies are desperate to attract bets on them in order to balance their book.
The favourite-longshot bias can be exploited by simply betting on all starting price favourites priced at less than 1 to 4. However, this wouldn’t make you rich. You would make a profit of around 2 to 3 per cent on turnover, but this is much better than the 34 per cent loss you would have made had you simply backed every horse priced at odds greater than 4 to 1 against!
Implementing betting market systems
Systems based around the betting market yield modest returns but they are very consistent and you have a high probability of success that psychologically is very uplifting, especially when you are betting to large stakes.
The downside is that you need to be watching the betting market very closely in order to strike the right bet at the right time, but in the digital age you can find plenty of software to help you in this task.
You can make a positive return by simply following the betting market.