Shorter Prices Can Mean Greater Value

Which do you think offers greater long-term value? Betting shorter-priced horses or longshots?

Many punters would be surprised to learn that they will do better by backing shorter-priced horses rather than those that are at bigger odds. This is because it has been proven over many years, both in Australia and overseas, that there is a favourite/longshot bias.

The basic premise of this bias is that the rate of return decreases as price increases. Or in other words, punters tend to under-rate the winning chances of favourites and over-rate the winning chances of longer priced horses.

As an example, a price of $3.00 about the favourite is likely to be very close to it's 'true odds'.

In contrast, a price of $100 about the rank outsider of the field is likely to be well and truly 'under the odds'.

Not a raceday goes by without a number of longshots being touted as 'value'. While this may be true for individual horses, in the long-term you will have a smaller edge against you by focusing your attention on shorter-priced runners.

While there are a number of factors that contribute to the favourite/longshot bias, no-one can say definitively why it remains in existence. Some analysts put it down to risk-taking behaviour and the propensity for many people to seek big returns for a relatively small outlay. Others say that most people are simply not capable of differentiating between small and tiny probabilities, and therefore we (incorrectly) price both similarly.

Not only does the favourite/longshot bias occur in the horse racing industry, but also in sports betting. An analysis of UK bookmaker William Hill's football betting odds from 2000 to 2007 showed that if you had only backed teams at $1.50 or shorter you would have lost just 5% on turnover. Backing all favourites would have resulted in a 12% loss on turnover, while backing all underdogs during this same 7 year period resulted in a loss on turnover of 16%.

So as a punter how can you use this favourite/longshot bias to improve your own results? Consider trying to focus on favoured horses rather than trying to back that elusive longshot winner.

To demonstrate this is more than just a theory, today we’ll take a look at the profitability of backing leading jockeys, trainers and sires.

Firstly let's take a look at leading Victorian jockey Brad Rawiller. Over the last five years if you were to back all of his mounts you would have lost around 8% on turnover (at TAB prices). But when we take a closer look at his figures, a typical favourite/longshot bias clearly emerges.

Brad Rawiller Price range Profitability Under $2.50 0% profit on turnover $2.60 to $8 -3% POT $8.10 to $16 -15% POT $16.01 and over -45% POT

Now we'll look at Craig Newitt Price range Profitability Under $2.50 -7% profit on turnover $2.60 to $8 -17% POT $8.10 to $16 -48% POT $16.10 and over -60% POT

OK let's analyse two leading trainers to see if the favourite/longshot bias also exists there.

Lee Freedman Price range Profitability Under $2.50 -2% profit on turnover $2.60 to $8 -14% POT $8.10 to $16 -32% POT $16.10 and over -47% POT

David Hayes Price range Profitability Under $2.50 -20% profit on turnover $2.60 to $8 -30% POT $8.10 to $16 -28% POT $16.10 and over -45% POT

And if you needed further proof, let's consider the results if you were to follow two leading sires: Encosta De Lago Price range Profitability Under $2.50 -13% profit on turnover $2.60 to $8 -24% POT $8.10 to $16 -29% POT $16.10 and over -43% POT

Price range Profitability Under $2.50 -10% profit on turnover $2.60 to $8 -22% POT $8.10 to $16 -28% POT $16.10 and over -43% POT

So in every example above, whether it was a jockey, trainer or sire, there was a clear demonstration that the rate of return decreases as price increases.

As a punter you should ask yourself does this bias also apply to your own betting? I would be almost certain that it does, and with reasonable record-keeping you can answer that question definitively.

The favourite/longshot bias has existed for many years in racing, sports betting and financial markets and is unlikely to disappear any time soon. So use it to your advantage by focusing on shorter priced horses and your results should improve immediately.

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