Efficiency of Horse Racing Markets on Betfair

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spreadbetting
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Ferru123 wrote:
Sat Jan 27, 2018 5:26 pm
As an experiment, I sorted all horses in the 2017 horse racing data file by ascending BSP, and then deleted duplicates by the 'race date and time' column, meaning I was left with just one horse per race - the horse with the lowest BSP in that race.

That prevents the over-round issue that Derek was referring to distorting the results.

The sample size I was left with was 13,000. Average odds 3.41.

The commission-free lay ROI over the sample was 0.22%, suggesting very high market efficiency at BSP over a large sample.

Jeff
But what was the overround on those markets, Jeff, you'd really need to adjust the BSP to take into account any over/underround otherwise you may be simply getting your 0.22% ROI from the fact there are more layers than backers in the BSP markets. Just did a quick average BSP overround and it came out at 99.875% from just under 122,000 markets.
Iron
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Hi SB

I also don't know how BSP is calculated - I'm not sure anyone outside of Betfair does - but my understanding is that it approximates to the average price of the money traded just before the off, so surely is a good guide to how efficient the market is at that point? I'm not saying you're wrong, btw - I keep an open mind. :)

Jeff
spreadbetting wrote:
Sat Jan 27, 2018 5:41 pm
But what was the overround on those markets, Jeff, you'd really need to adjust the BSP to take into account any over/underround otherwise you may be simply getting your 0.22% ROI from the fact there are more layers than backers in the BSP markets.
spreadbetting
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The BSP isn't set to return to 100% is all I was pointing out, Jeff, can be under or overround. So your ROI could just as easily be coming from the fact those markets were overbroke, unless you tweak your figures to that theoretical 100% they'd be flawed.
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ShaunWhite
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to75ne wrote:
Sat Jan 27, 2018 1:24 pm
Derek27 wrote:
Sat Jan 27, 2018 1:18 pm
Euler wrote:
Sat Jan 27, 2018 1:14 pm
Only 536 people have actually been high enough above the earth to see it as a globe, perhaps, unless that is a conspiracy. But 7bn people live on it, I'm plumping for flat.

i dont believe for a minute your an idiot flat earther, so i can only assume this is part of your contrarian approach to trading (going against the crowd).
It's been a while since I've been at 40,000 feet, but I thought you could just about see the curvature of the earth from that height ?
i think you need a lot higher 15 to 20 miles
You can see it at sea level.

When a ship approaches you see its mast before the superstructure, or if you're approaching land you see the mountain tops first. Known since the first canoe ventured too far offshore, certainly by all the circumnavigators.

You're all only thinking of seeing the curve in one plane.
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Derek27
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Ferru123 wrote:
Sat Jan 27, 2018 5:54 pm
Hi SB

I also don't know how BSP is calculated - I'm not sure anyone outside of Betfair does - but my understanding is that it approximates to the average price of the money traded just before the off, so surely is a good guide to how efficient the market is at that point? I'm not saying you're wrong, btw - I keep an open mind. :)

Jeff
spreadbetting wrote:
Sat Jan 27, 2018 5:41 pm
But what was the overround on those markets, Jeff, you'd really need to adjust the BSP to take into account any over/underround otherwise you may be simply getting your 0.22% ROI from the fact there are more layers than backers in the BSP markets.
It is quite complicated but Betfair did explain how it works at the time.

A provisional price is calculated from SP bets. If it's below exchange prices at the off, exchange back bets get matched with SP money and that raises the SP. Conversely, if it's above current prices unmatched lay orders get matched to reduce SP.
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to75ne
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ShaunWhite wrote:
Sat Jan 27, 2018 6:26 pm
to75ne wrote:
Sat Jan 27, 2018 1:24 pm
Derek27 wrote:
Sat Jan 27, 2018 1:18 pm

It's been a while since I've been at 40,000 feet, but I thought you could just about see the curvature of the earth from that height ?
i think you need a lot higher 15 to 20 miles
You can see it at sea level.

When a ship approaches you see its mast before the superstructure, or if you're approaching land you see the mountain tops first. Known since the first canoe ventured too far offshore, certainly by all the circumnavigators.

You're all only thinking of seeing the curve in one plane.

i have no doubt that is true but (and i live on the coast and have a boat), if you did know not the earth was a sphere, it does not strike you as being a sphere, it does appear to be an edge, and before people (sailors in particular ) knew any better, they believed there was an edge and get too close , over you go.
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Derek27
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Ferru123 wrote:
Sat Jan 27, 2018 5:01 pm


However, it's harder to explain away the fact that, for example, of the 126 horses that set off with BSPs of 3.0 in 2017, 34% won. Or the fact that, of the 241 horses that set off with BSPs of 4.0, 26% won. Does that kind of accuracy not suggest that, at worst, the BSP is there or thereabouts, over a large sample of horses?

As an aside, I doubt that many people can beat the BSP long-term, but I could be wrong.

Jeff
It proves the average is close as one would expect. Lets face it,you're not going to get 3.0s under performing and 4.0s over performing. The efficiency of markets should be measured by how much it deviates fron the mean.

I know Timeform have made decent profits at bookie prices so they must do better at BSP.
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Derek27
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to75ne wrote:
Sat Jan 27, 2018 6:35 pm

i have no doubt that is true but (and i live on the coast and have a boat)
I should have guessed you're a sailer from your username. :)
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Derek27
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Ferru123 wrote:
Sat Jan 27, 2018 5:54 pm
I also don't know how BSP is calculated -
Here you are.

https://promo.betfair.com/betfairsp/FAQ ... kings.html
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Derek27
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I think the problem with this thread is that we haven't clearly defined efficiency, and may have different ideas of what it is, hence the confusion.

If you instruct a carpenter to cut two three-foot planks of wood, he cuts one 2 feet 10 inches and the other 3 feet 2 inches - is he an efficient carpenter because they average 3 feet exactly ?
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ShaunWhite
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Derek27 wrote:
Sun Jan 28, 2018 1:33 am
I think the problem with this thread is that we haven't clearly defined efficiency, and may have different ideas of what it is, hence the confusion.

If you instruct a carpenter to cut two three-foot planks of wood, he cuts one 2 feet 10 inches and the other 3 feet 2 inches - is he an efficient carpenter because they average 3 feet exactly ?
Your carpenter isn't efficient, he's inept.

Efficient, implide chance = actual chance. Deviates on individual selections, accurate over a large sample.

'Efficient Market Hypothesis - EMH'
The efficient market hypothesis (EMH) is an investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and the only way an investor can possibly obtain higher returns is by purchasing riskier investments.

https://www.investopedia.com/terms/e/ef ... thesis.asp

Find and replace Stock with Horse...it's a 'hypothesis' because the individual case described can't be proven although the overall effect can.
Iron
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An analogy would be that, if the market gives odds of 2.0 on the toss of an unbiased coin that can't land on its side, it's perfectly efficient.

If it gives odds of 2.5, then it's inefficient (although normally you'd expect this inefficiency to be short lived, as it probably won't take long for savvy people with deep pockets to notice that the odds are seriously out).

Jeff
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Euler
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If you want an example of inefficiency and an edge. I stood up last week today and presented a load of different things and traded live. One particular set up occurred that I described beutifully how it would play out and it did exactly that. A week later the same set up occurred and played out exactly the same way. But when I tweeted the chart I was accused of after timing, despite the fact I effectively predicted it a week before it actually happened.

This used to frustrate me, but now I just sit here and realise that these are the people on the other side of the market and there they will stubbornly stay. Regardless of whether the market is efficient or not, you have people that will always be on the wrong side of the bell curve and half the trick is to not be them.
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ShaunWhite
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Euler wrote:
Mon Jan 29, 2018 3:24 pm
If you want an example of inefficiency...
The only thing missing from that story was an example of inefficiency.

Did you spot one that was miles from where most of the volume was traded and it came back or something like that?
Emmson
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Unable to sleep as I am I've enjoyed revisiting this old thread that got a bit testy but nevertheless has some interesting content. 8-)
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