Efficiency of Horse Racing Markets on Betfair

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Derek27
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Looking at the graph above, if the true chance of the horse was at the off, that would suggest that, with the exception of the last bet matched, everybody who backed it had a value bet and everybody who laid it had a bad value bet, for the entire 24 hours or so.

In all probabilities its true chance is closer to the average price. I suspect traders were closing trades in desperation - or even during the course of a heart-attack. :lol:
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ShaunWhite
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For any given individual horse it's impossible to say what the true price was, only what the crowd thought it was. All the stats and maths might tell you that markets are most accurate 30s out or at peak volume blah blah blah but that's over 1000s of races... not for an individual race. They are animals not machines, it's an unknown known as George Bush would have said.
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Derek27
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ShaunWhite wrote:
Tue Jan 16, 2018 9:18 pm
For any given individual horse it's impossible to say what the true price was, only what the crowd thought it was. All the stats and maths might tell you that markets are most accurate 30s out or at peak volume blah blah blah but that's over 1000s of races... not for an individual race. They are animals not machines, it's an unknown known as George Bush would have said.
It was Donald Rumsfeld that said it, and unknown knowns was the one combination he left out. There are known unknowns, but it's hard to define an unknown known, because it's self-contradictory to say you don't know something that you know. :P
Iron
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The evidence shows incontrovertibly that the market is extremely efficient at the off (at least the horse racing market).

For example, if you had laid all 46, 899 horses with BSPs under 10.0 in 2017, then if there was zero commission you'd have made a profit on risk of 0.12% (based on data downloaded from the relevant link in this thread - https://betangel.com/forum/viewtopic.ph ... 7&start=10).

Jeff
Derek27 wrote:
Thu Dec 28, 2017 7:21 pm
In my opinion, the only logical conclusion to draw is that the market doesn't have a clue what chance the favourite had. You can't trust a market that says a horse has a 2.1 chance when just a few minutes earlier it thought it had a 2.9 chance.
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Derek27
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Ferru123 wrote:
Fri Jan 26, 2018 11:44 pm
The evidence shows incontrovertibly that the market is extremely efficient at the off (at least the horse racing market).

For example, if you had laid all 46, 899 horses with BSPs under 10.0 in 2017, then if there was zero commission you'd have made a profit on risk of 0.12% (based on data downloaded from the relevant link in this thread - https://betangel.com/forum/viewtopic.ph ... 7&start=10).

Jeff
Derek27 wrote:
Thu Dec 28, 2017 7:21 pm
In my opinion, the only logical conclusion to draw is that the market doesn't have a clue what chance the favourite had. You can't trust a market that says a horse has a 2.1 chance when just a few minutes earlier it thought it had a 2.9 chance.
That's what I would expect from efficient markets, but it's also what I would expect from inefficient markets, because the overround is approximately 100% so according to the laws of probability you would get that result regardless. I would expect similar results if you laid such horses 15 minutes before the off.
Genuine Approval_10623818_18_46_21.png
You're not seriously telling me that they got this one's price right just before the off ?

They didn't have a clue!
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Derek27
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To raise another question, if a NH is about to start but without warning it's announced there will be a five minute delay, what's the situation then?

Was the market most efficient when the race was due off or five minutes later?

Or will the prices remain static for five minutes?
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ShaunWhite
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I don't think anyone has ever said an individual market is 'efficient' ie every horse is trading at its actual chance. The correlation only appears over a large sample.

A horse runs at 3.5 and wins.... There's absolutely no way to tell that it would have won once in 2 runs or won once in 10. It might be over valued or undervalued. But look at 1000 3.5shots and they'll win with approximately with that frequency.

A market isn't efficient but the market is.
Last edited by ShaunWhite on Sat Jan 27, 2018 3:14 am, edited 1 time in total.
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Derek27
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I just tried to reply to your post and got a message saying the post doesn't exist. I then realised it was completely changed!
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Derek27
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What I'm questioning is why should the market, on average, be more efficient at the off, but not 5 minutes before or 5 minutes after, if a race was delayed by 5 minutes ?

A horse could be 5.0, 5 minutes before the off. It could be 3.0 at the off. If the race is delayed 5 minutes because of a problem with the starting mechanism, it could well be back to 5.0 again.

The off time seem to be to be quite a random time to pick its peak of efficiency.
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Derek27
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ShaunWhite wrote:
Sat Jan 27, 2018 2:20 am
But look at 1000 3.5shots and they'll win with approximately with that frequency.
You'll find that that's true whether it's 3.5 at the off, 15 minutes before, or 2 hours before. It's not the time that it's 3.5 that's important, it's just the fact that it's 3.5 at whatever time.
Last edited by Derek27 on Sat Jan 27, 2018 3:43 am, edited 1 time in total.
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ShaunWhite
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Derek27 wrote:
Sat Jan 27, 2018 12:28 am
To raise another question, if a NH is about to start but without warning it's announced there will be a five minute delay, what's the situation then?

Was the market most efficient when the race was due off or five minutes later?

Or will the prices remain static for five minutes?
They don't usually move very far unless something is happening on the ground. But as some horses cope with various situations differently to others, and might do so differently from one day to the next, who knows if any movement either random or deliberate is justified.

Don't let it melt your brain Derek, markets move, gamblers try and guess what price is right, and over lots of races SP is right....ish. That's it isn't it?
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Derek27
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ShaunWhite wrote:
Sat Jan 27, 2018 3:41 am

They don't usually move very far unless something is happening on the ground.
Are you being serious, prices don't move far in 5 minutes, after all the graphs that get posted on this forum ???

Prices move substantially in a matter of minutes for no obvious reason other than the market is being driven by traders who couldn't care less what chance a horse has - they only care about their trades, and closing them.

According to the laws of probability, if you gave each horse a random price, as long as the overround is 100%, you should break even backing or laying any particular number.
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ShaunWhite
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Derek27 wrote:
Sat Jan 27, 2018 3:51 am
ShaunWhite wrote:
Sat Jan 27, 2018 3:41 am
They don't usually move very far unless something is happening on the ground.
Are you being serious, prices don't move far in 5 minutes, after all the graphs that get posted on this forum ???
Thanks for pointing out that prices can move a long way in 5 minutes. But rather than assuming i'm some sort of idiot, it could have been that you didn't understand my reply or that I didn't understand your question.

You said if it was 'about to start', that's quite vague, I don't often see huge moves like these when there's a short delay once they're milling around and bots and most sensible traders are out of the market although they obviously do happen from time to time.

I'm going to draw a line under this and agree to disagree.
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Euler
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The market is efficient or not depending on how you measure it. I make money from inefficient markets but can also prove they are completely efficient.
Iron
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Hi Derek

I am no statistician, but I was pretty sure that was wrong, so I tested it.

The results of laying at BSP to a risk of 1 point per horse with zero commission for all runners in 2017 are as follows:

Risk 122409
P/L 1.093162656
ROI 8.93041E-06

The results when you assign each horse a random percentage chance between 1% and 99% are as follows:

Risk 122409
P/L: 451222.3991
ROI: 368.62%

I would therefore conclude that BSP beats randomness. :)

I once read a mathematical explanation of the wisdom of the crowds. The maths went over my head, but the principle was that, the more people independently arrive at an estimation of something, the more accurate it's likely to be as they more perspectives are brought to bear (which is a good argument for the jury system and democracy, incidentally). One person may overestimate the effect of a 9lbs extra weight, but if someone else underestimates it by the same amount, in theory they cancel each other out.

I imagine that all sorts of things move the markets - bookies hedging their bets, traders, syndicates, spoofers, you name it - which may account for a lot of the volatility. How markets can go from jumping all over the place to being spookily accurate, I don't know.

Maybe what happens is that, once the market moves into value lay or back territory, value backers or layers push it into accurate price territory until there is no more value to be had (because the price is near as dammit spot on).

Any thoughts?

Jeff
Derek27 wrote:
Sat Jan 27, 2018 3:51 am
According to the laws of probability, if you gave each horse a random price, as long as the overround is 100%, you should break even backing or laying any particular number.
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