Efficiency of Horse Racing Markets on Betfair

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Derek27
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If by efficient you mean reflecting the true probabilities of horses winning, I don't think they are getting more efficient or ever will be.

I have a live spreadsheet that calculates the overrounds for the highest best prices available to back. If I start the spreadsheet just five minutes before the off, in the space of five minutes the market fluctuations give a back overround of around 90% or less, for most markets.

It goes without saying that when a horse is backed from 4.0 > 3.0 in just two minutes it can't have a 3.0 chance and a 4.0 chance. Whatever its chances, somewhere along the spectrum there is outstanding value.
spreadbetting
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Derek27 wrote:
Sun Dec 17, 2017 5:52 pm
I have a live spreadsheet that calculates the overrounds for the highest best prices available to back. If I start the spreadsheet just five minutes before the off, in the space of five minutes the market fluctuations give a back overround of around 90% or less, for most markets.

It goes without saying that when a horse is backed from 4.0 > 3.0 in just two minutes it can't have a 3.0 chance and a 4.0 chance. Whatever its chances, somewhere along the spectrum there is outstanding value.
A lot can happen in 2 minutes , it's perfectly possible for it to have been a 3 or a 4 shot within that time frame and I'm sure if you stuck you spreadsheet on a football match you'd also get a degree of movement. For us to consider whether markets are efficient we'd simply have to look at snapshots of set times or simply check odds traded against win rates to see if the probability of winning tallied with the odds matched. If we consider in running markets, which should in theory throw up lots of errors, you'll be hard pushed to find any odds increment that is out of line with the win rate enough to profit from them, that should give you an indication of how 'efficient' markets can be as a whole. Much the same as quantum physics markets can be efficient and inefficent at the same time , as traders we can profit when we spot those inefficiencies, especially if we understand why they are occuring.
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Derek27
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spreadbetting wrote:
Sun Dec 17, 2017 10:40 pm
Derek27 wrote:
Sun Dec 17, 2017 5:52 pm
I have a live spreadsheet that calculates the overrounds for the highest best prices available to back. If I start the spreadsheet just five minutes before the off, in the space of five minutes the market fluctuations give a back overround of around 90% or less, for most markets.

It goes without saying that when a horse is backed from 4.0 > 3.0 in just two minutes it can't have a 3.0 chance and a 4.0 chance. Whatever its chances, somewhere along the spectrum there is outstanding value.
A lot can happen in 2 minutes , it's perfectly possible for it to have been a 3 or a 4 shot within that time frame and I'm sure if you stuck you spreadsheet on a football match you'd also get a degree of movement. For us to consider whether markets are efficient we'd simply have to look at snapshots of set times or simply check odds traded against win rates to see if the probability of winning tallied with the odds matched. If we consider in running markets, which should in theory throw up lots of errors, you'll be hard pushed to find any odds increment that is out of line with the win rate enough to profit from them, that should give you an indication of how 'efficient' markets can be as a whole. Much the same as quantum physics markets can be efficient and inefficent at the same time , as traders we can profit when we spot those inefficiencies, especially if we understand why they are occuring.
I'd have to disagree with that. Not much can happen in two minutes in a pre-race horse racing market. If you can back a horse at 4 and lay it two minutes later at 3, in the absence of any information or anything obvious that could have changed its chances of winning, it's proof that the markets are inefficient.

I don't look at football markets but it's not a question of degree of movement, but how much ?

It obviously wouldn't move as much as a horse race.
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Dublin_Flyer
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Derek27 wrote:
Sat Dec 16, 2017 1:13 pm

My brother is a statistician who use to work on the statistical modules that calculate probabilities for the bookies to compile their odds. From what he tells me it is possible to quite accurately calculate probabilities for the premiership title (not sure about individual matches), and perhaps other sports. As you suggested it's not possible for horse racing, the size of the field being just one of many factors. :)
Euler had a youtube video on the BetAngel channel about Wage Bill v League position. General overview was the more you pay, the better you do unless you're Newcastle or Villa I think, was the nuts and bolts of the probability predictions along the same lines?

EDIT: sorry for sidetracking initial topic
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Derek27
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Dublin_Flyer wrote:
Mon Dec 18, 2017 1:28 am
Derek27 wrote:
Sat Dec 16, 2017 1:13 pm

My brother is a statistician who use to work on the statistical modules that calculate probabilities for the bookies to compile their odds. From what he tells me it is possible to quite accurately calculate probabilities for the premiership title (not sure about individual matches), and perhaps other sports. As you suggested it's not possible for horse racing, the size of the field being just one of many factors. :)
Euler had a youtube video on the BetAngel channel about Wage Bill v League position. General overview was the more you pay, the better you do unless you're Newcastle or Villa I think, was the nuts and bolts of the probability predictions along the same lines?

EDIT: sorry for sidetracking initial topic
My brother's the statistician, not me, so I wouldn't have a clue how these guys calculate probabilities.

What I can say thought, is that if a horse is purchased for a massive price (similar to football club spending), this information is only useful for two-year-olds or maiden races where there isn't much form to go on, as expensive horses obviously average better than cheap horses. But for horses with proven form, the price tag becomes irrelevant as you can see how good they are. I would imagine it's the same for football. A club spending money is likely to produce better results but you would evaluate their capabilities and probabilities on the results.
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Euler
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I've measured various metrics over the years and the book percentage is shrinking, so the market is getting more 'efficient'. But the volatility is getting higher so it's less efficient. It's a sort of inefficient efficiency.
Wolf1877
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Euler wrote:
Mon Dec 18, 2017 9:23 am
I've measured various metrics over the years and the book percentage is shrinking, so the market is getting more 'efficient'. But the volatility is getting higher so it's less efficient. It's a sort of inefficient efficiency.
My take on that is that the "efficiency" is created by greater competition in arb-ing whilst the volatility is created by the markets being manipulated by traders and their bots.

As a newbie I've been very surprised at just how much volatility there is in the racing markets. The frequent seemingly artificial volatility makes the markets very difficult to read visually and trade manually for me anyway. The opportunity for anyone who can read/predict the likely outcomes from the volatility are great though. I do wonder how much attention I should start giving to traditional racing fundamentals (i.e. developing analysis methods of pre race form/handicaps etc) to gain a better idea of fair price for a horse so that I can profit when volatility pushes prices to unrealistic or unjustified levels.
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Euler
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You often see two equally weighted horses in a handicap with the same rating, where there is no difference between them in any respect but the prices vary widely, despite starting at the 'correct' price. Makes no sense.
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ShaunWhite
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Euler wrote:
Mon Dec 18, 2017 11:09 am
You often see two equally weighted horses in a handicap with the same rating, where there is no difference between them in any respect but the prices vary widely, despite starting at the 'correct' price. Makes no sense.
The handicapping system isn't especially hard to fiddle, horses with the same weighting and rating are often of quite different ability.
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Derek27
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Two horses can have the same handicap rating, one could be out of form and due to draw his pension, the other could be a lightly raced sort full of potential and a stone better than his rating.
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Euler
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I realise both those points, but how can the price then move 20% in the last five minutes while the horses are merrily trotting to post without a care in the world. Probably had nearly a day to get the pricing right.
weemac
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Because price 'efficiency' is reached in very large part via 'wisdom of the crowd', and the crowd can't/won't/doesn't want to act until the last few minutes. With only £70k matched 2 minutes pre-off today in one Musselburgh handicap, 'true' price discovery would be impossible many hours out. And smart or knowledgeable money would surely hold back in the hope of getting a better price in any case? True, they might get flushed out by early support, but why throw your money at it 12 hours out, only to destroy the price for yourself with only a few quid available to match?
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Derek27
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I've always struggled to understand how a horse can drift from 4-1 to 6-1, and back down to 4-1 in the space of five minutes. This is something that has been happening on-course, long before Betfair was born.

With Betfair though, and cold traders placing bets purely based on where the market will move and without caring about the true chances of the horse winning, I would imagine when a horse drifts people are just jumping on the bandwagon until a big-time punter sees an outstanding opportunity, backs it for a few grand, and the trend reverses.
ajdal
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Derek27 wrote:
Mon Dec 18, 2017 10:53 pm
I've always struggled to understand how a horse can drift from 4-1 to 6-1, and back down to 4-1 in the space of five minutes. This is something that has been happening on-course, long before Betfair was born.

With Betfair though, and cold traders placing bets purely based on where the market will move and without caring about the true chances of the horse winning, I would imagine when a horse drifts people are just jumping on the bandwagon until a big-time punter sees an outstanding opportunity, backs it for a few grand, and the trend reverses.
Once you appreciate the scale of resources some traders have at their disposal and that (apart from true gambles) the aim is to put smaller traders in a position where they cash out in fear of the escalating loses then it all makes sense.

Betfair is not driven by the same engine that drove bookmaker prices in the past when the book was driven primarily by lay balancing.
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Derek27 wrote:
Mon Dec 18, 2017 10:53 pm
I've always struggled to understand how a horse can drift from 4-1 to 6-1, and back down to 4-1 in the space of five minutes. This is something that has been happening on-course, long before Betfair was born.
You can't expect a market 5 minutes out, with maybe only £50K matched, to be as 'efficient' as a market at the off with possibly £1M matched. The trading span of a horse race is very short and even back in the old days the action generally only takes place after the horses have entered the paddock. Money will never enter the market as an ordered stream as not everyone is privy to the same information or even approaching the market with the same angle. If you check out the chart of the day and fat fingers threads you should be able to spot patterns as to how markets react to the volumes passing thru them.
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