Favourite – Longshot Bias In Fixed Odds Football Markets

The Favourite-Longshot Bias in Football Fixed Odds Betting

Consider a typical Premiership game, Manchester United (home) versus Bolton (away). In an efficient betting market, the prices for the home and away win should reflect all available information about the chances of either side winning, which if available to both bookmaker and punters alike, should then be backed in direct proportion to the probability of each result occurring. Suppose Manchester United was considered to be 6 times more likely to win than Bolton. An efficient betting market might then predict home and away win odds of 1.333 (or 1/3) and 8.0 (or 7/1) respectively, and we would expect punters to bet £1.333 on Bolton for every £8 that was bet on Manchester United. If the draw was priced at 4 (or 3/1), the bookmakers margin, or overround, for this book would be 112.5%. There might be subtle changes in price, in response to varied money flow, but if the market remained efficient, every price would remain close to that predicted by the information available.

Unfortunately for the bookmaker, punters don’t readily conform to normative theories of economic efficiency. Whilst market efficiency implies an equality of expected returns for Manchester United and Bolton alike, many punters express different utility attitudes to bets of equal profit expectancy if the bets have different win probabilities. Put more simply, a risk-loving punter sees more point to a 7/1 shot than a 1/3 shot even though over the long term he won’t win any more or less on either. He sees more benefit or utility in a short term reward of £7 for a £1 stake than making 33 pence even though he is 6 times more likely to win the latter. Consequently, whilst there will still be more money bet overall on Manchester United than Bolton, the bookmaker will see proportionally more money bet on the 7/1 shot than is justified by its objective chances of winning. In this example, for every £8 bet on Manchester United, the actual amount bet on Bolton might well be £1.50 or more

There are all sorts of reasons that might explain why many punters express this attitude, which is beyond the scope of this article. For now it is sufficient to say that if Bolton, as the underdog or longshot is overbet, whilst Manchester United, the favourite, is underbet, the bookmaker will have to shorten his price for Bolton and lengthen his price for Manchester United until they reflect the actual volumes of traded bets and the liabilities he faces. More generally, a bookmaker will have to lower the expected return on longshots whilst raising them for favourites, until they once again provide equal expected betting utility for the population of punters. This market anomaly is more commonly known as the favourite-longshot bias and is simply the result of too much money being bet on longshots, and too little on favourites, relative to their “true” chances of winning.

Just how much are expected returns raised and lowered on favourites and underdogs respectively? An analysis of betting odds taken from the bookmaker William Hill for over 14,000 games played from 2000 to 2007 in the English professional league divisions confirms the presence of a favourite-longshot bias. Backing every home and away result would have yielded, on average, a loss of 12.44 pence for every £1 staked. By contrast, backing all home and away prices greater than 2/1 would have lost the punter 16.75 pence for every £1 staked, whereas betting on all teams with an odds-on price would have lost 9.17 pence. Backing teams at shorter than 1/2 would have lost only 4.86 pence for every £1. A more detailed breakdown of returns against betting price is illustrated in the figure below.

Of course, understanding this favourite-longshot bias will not on its own make a profit for the punter. It should demonstrate, however, that making money from underdogs is that much harder than one might otherwise have expected.

Joseph Buchdahl is the author of the book Fixed Odds Sports Betting: Statistical Forecasting & Risk Management and webmaster of www.Football-Data.co.uk

Fixed Odds Sports Betting investigates:

·Markets in fixed odds sports betting

·The bookmaker’s overround

·Value betting

·Ratings systems for sports prediction

·Profitability and risk

·Singles versus accumulators

·Staking plans and money management

·The favourite-longshot bias

·Sports advisory services

·Betting records and their significance testing

Marketing Points:

·Adopts a numerical approach to fixed odds sports betting

·Provides an in-depth examination of betting risk and money management

·Utilises extensive data analyses and staking plan computer simulations

·Invaluable reading for statistically-literate sports bettors

·Many useful ideas for the more casual punter

·Exposes some of the long-standing myths surrounding fixed odds betting

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