Betting Strategy – Favourite vs Longshot Bias

What is the Favourite / Longshot Bias?

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What is favourite-longshot bias? In the sports betting industry, this is a common practice where bookmakers apply a margin to a market and tend to weight more margin towards the longshot.

Margins are part and parcel of everyday life for bookmakers and it’s how they make their money. It’s called “over-round” in the UK or “Vig” – “Juice”. Different bookmakers have different percentages of margins they apply depending on the sports.

I’ve taken a look at a game from 23/01/2018 to demonstrate how bookmakers apply an “over-round”. The game was Partick v Celtic in the Scottish Premier League.

As you can see from the table above the % of the odds don’t add up to 100%, if they added up to 100% this would be a fair market. So Bet365 have a 6.31% over round applied to this market to guarantee a profit.

Now if we want to make this a fair market, we can simply divide the odds by the over round. The problem we have, is we think there is a favourite-longshot bias, suggesting more weight for the margin is applied to the underdog as the punters won’t see the difference because the price is already “big” or “value”.

If the bookmaker moved the favourite to say 1.19 and you were looking to back it you would notice it a lot more and would be put off, now as it’s no longer value.

Correct?

However, if they moved the longshot price to say 12.00 you would perhaps still think its value due to the size of the odds when in fact it really isn’t “value”. The only way anything is “value” is if you’re making your own prices on the markets and trust you’re doing it correctly.

Now we don’t know exactly what weights the bookmakers place on the markets so we can’t guess the favourite-longshot bias. What we can do is apply the same margin equally across the market to try and ascertain the “true odds”. See below for an example of this:

• Home = 7.69%/106.31% = 7.23% convert that into decimal to get 13.83 (100/7.23)
• Draw = 16.66%/106.31% = 15.67% convert that into decimal to get 6.38 (100/15.67)
• Away = 81.96%/106.31% = 77.10% convert that into decimal to get 1.30 (100/77.10)

To convert the % into a decimal you simply divide 100/7.23 = 13.83 – please see the calculations in brackets for the decimal conversion.

Now our market looks like this:

Now we have a “fair” market and “true odds” without any over round or vig.

Now, which outcome would you select?

So why do the bookmakers put more weight of the margin in the longshot?

Normal punters/bettors will almost every time back the longshot as this is a risk vs reward scenario, the risk is little, however, the reward is greater due to price.

However, with the bookmakers putting almost all of their “over-round” margin into the longshot, in fact, the punters should be getting a better price, but they don’t realise this.

Now with all the longshots being overbet on, it’s common that the bookmakers have to shorten prices to manage exposure and liability. Another spin on this is that the bookmakers are intentionally exploiting the punter's preference to back longshots rather than reacting to exposure. David McDonald from Southampton University’s Centre for Risk has discussed this here.

Pinnacle and betting brokers, who use multiple Asian books will tend to have a much less of an “over-round”. My advice would be to bet with them as the price is much closer to the “true odds”. One last quick example, the “over-round” for the Partick v Celtic game was 1.88% with Vodds.

 

 

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TAGS > betting masterclass, betting strategy, betting systems, favourite bias, longshot bias, odds compiling