Market percentage, favourite – long shot bias
  • If we’re purely looking for low market percentage, wouldn’t we just bet in sport instead of racing?
  • Why it’s not that simple… the favourite – longshot bias

Yesterday we took a look at the price you pay when having a punt, and how it’s clearly visible to you in the market percentage.

The gist of the advice is simple: make sure you’re betting into the lowest market percentages as possible.

But taken as general advice, this presents a bit of a conundrum….

If you look at horse racing markets, they tend to hover around 130%, before getting down to between 115% – 120% at the jump.

But if you look at the main markets for sport, they tend to be around 105%. Or at most, 110%.

So you should only bet into sport, and not racing… right?

Wrong.

Unfortunately, it gets a little more complicated than that.

Why?

The Favourite – Longshot Bias

You might have heard about the favourite-longshot bias. It’s a well-recognised phenomenon in betting.

In basic terms, it refers to the tendency for punters to over-value long-shot chances in betting markets. Therefore long-shot chances tend to be over-bet, and their odds shorter than they truly should be… while favourites tend to be under-bet and thus longer than they should be.

It also happens because bookies take advantage of this fact and make roughies shorter prices than they should be. They also offer better odds on the favourites to be more competitive at the pointy end of the market and get more money in the bag. Bookmaking without turnover equals not much profit.

Let’s look at an example.

Let’s look at an example.

The Favourite – Longshot Bias in action

There’s an upcoming cricket match, with the true head-to-head chances – as calculated by smart punters like us – as follows:

Australia              70%

England               30%

Total                    100%

Now, we learnt yesterday how to convert those percentages into odds – you just divide them into 1. So the true odds on the match-up are:

Australia              $1.43

England               $3.33

As we also learnt yesterday, a bookmaker needs to make a profit, so he doesn’t just offer that 100% market… he might add, for example, 3% margin onto each for a total market percentage of 106%

Australia              73%

England               33%

Total                    106%

So the prices he puts up?

Australia              $1.37

England               $3.03

(In the case of the bookmaker, they also round these prices off… we’ve just left them at the exact figures to illustrate the numbers)

So provided punters bet proportionately, he’ll make a 6% profit.

Bookies, however, recognise the existence of the favourite-longshot bias, and know that punters will (in a proportional sense) back England more than they should. So instead of adding 3% to each of the outcomes, he adds his total of 6% unequally. He puts more into the longshot, because he knows he can offer poorer odds and still take money on it… because mugs love a longshot! For example:

Australia              72%

England               34%

Total                    106%

Prices:

Australia              $1.39

England               $2.94

The Favourite-Longshot Bias: so what?

As you can see, the value you get over time from longshots is less than it should be – and not purely because of the overall market percentage. The favourite-longshot bias shows that bookmakers don’t apply market percentage evenly across the outcomes, so you can’t expect the total market percentage to tell you exactly how much you’re going to lose – it depends on who you’re backing in the match, or race.

It’s another factor that you have to overcome as a punter, on top of the total market percentage that we spoke about yesterday.

Therefore… unfortunately… overcoming market percentage isn’t the only hurdle you face as a punter.

Can you overcome favourite-longshot bias?

You can, but you need to be very wary of price and ensure you’re only betting to value on any one given bet.

Like any profitable betting, knowing what is value, and only betting to that, is absolutely key.

Part 1 – Market Percentage: The Price Of Having A Punt

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