Trading Horse racing : Efficiency of Horse Racing Markets on Betfair

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ShaunWhite
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Sat Jan 27, 2018 3:41 am

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?

Derek27
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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 ???

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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Sat Jan 27, 2018 5:12 am

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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Sat Jan 27, 2018 9:28 am

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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Sat Jan 27, 2018 11:37 am

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.

Trader Pat
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Sat Jan 27, 2018 12:10 pm

Ferru123 wrote:
Sat Jan 27, 2018 11:37 am

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.

'Wisdom of the Crowds' goes out the window as soon as you add emotion into the equation. You need look no further than politics to see proof of that.

As for the argument of horse racing markets being efficient just take a look in the 'Chart of the Day' thread to see its just not so.

Iron
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Sat Jan 27, 2018 12:21 pm

Trader Pat wrote:
Sat Jan 27, 2018 12:10 pm
'Wisdom of the Crowds' goes out the window as soon as you add emotion into the equation. You need look no further than politics to see proof of that.
I don't see why emotion would obliterate the effect of wisdom of the crowd. You might feel optimistic about a horse's chances - but if I feel equally pessimistic, the two forces cancel each other out.

However, people are influenced by other people, which weakens the efficiency of the crowd, no doubt about that.
Trader Pat wrote:
Sat Jan 27, 2018 12:10 pm
As for the argument of horse racing markets being efficient just take a look in the 'Chart of the Day' thread to see its just not so.
I don't doubt there are inefficiencies - if there weren't, making money long term off the market would be impossible.

What I am saying is that, over a very large sample of races, the evidence clearly shows that BSP is nigh on perfect.

From the research I've done, it appears that, even if you focus particular types of races where you might expect the market to be inefficient, it's extremely efficient (for example, if you suspect that the market might be poor in maiden races, where there is little information to go on, or in Grade 7 so-called bandit races).

Jeff

LinusP
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Sat Jan 27, 2018 12:44 pm

Ferru123 wrote:
Sat Jan 27, 2018 11:37 am
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).
This is my understanding Jeff.

One thing I have started doing recently is analysing the 'edge' my bets get against SP (as a function of amount staked) this is helping me pinpoint when the market at 'x' was wrong. Of course looking at individual races its almost pointless but over just 1 day you tend to get a value which holds true long term. Would love to see how this value (edge) varies from manual trader to trader and if it has any relevance to their pnl.

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Euler
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Sat Jan 27, 2018 12:55 pm

When people talk about efficient markets, I ask..... Is the earth round or flat?

Trader Pat
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Sat Jan 27, 2018 1:07 pm

Ferru123 wrote:
Sat Jan 27, 2018 12:21 pm

I don't see why emotion would obliterate the effect of wisdom of the crowd. You might feel optimistic about a horse's chances - but if I feel equally pessimistic, the two forces cancel each other out.

However, people are influenced by other people, which weakens the efficiency of the crowd, no doubt about that.
I do think emotion plays a big part. In the jelly bean experiment (https://youtu.be/iOucwX7Z1HU) people were asked to guess the number of jelly beans in the jar and pretty much fired of random numbers without really giving it too much thought. But I think if there was an incentive for getting it right say £100 to the person who got closest you'd see people giving it more thought and probably coming up with a different number. Maybe the result of the experiment might have been different with emotion factored in.

I agree that if you had 100 people and you asked them to give reasons why they thought a horse would win or lose a race you'd have wisdom in the overall result but most people dont choose a horse in that way. Some back a horse just because its the favourite, others because the price is coming in or because of the name of the horse etc....

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