hindsight bias, short-priced favourites, queen elizabeth stakes history

“These short-priced favourites are great value” is not a phrase you hear very often.

However, if racing pundits had a better grasp of value and the favourite – longshot bias, then a saying like that might actually become more prevalent. That’s because it has been proven over many years that as odds increase, returns decrease.

Favourite – longshot bias

Longshots are overbet, while favourites are underbet.

Many punters are surprised to learn that they will do better by backing shorter-priced horses rather than those that are at bigger odds. 

Punters tend to under-rate the winning chances of favourites and over-rate the winning chances of longer priced horses. You will have a smaller edge against you by focusing your attention on shorter-priced runners.

As an example, a price of $3.00 about the favourite is likely to be very close to its ‘true odds’.

In contrast, a price of $100 about the rank outsider of the field is likely to be well and truly ‘under the odds’.

Not a raceday goes by without a number of longshots being touted as ‘value’. While this may be true for individual horses, as a general rule the bigger the price, the less value they are.

Longshots should be even longer. 

While there are a number of factors that contribute to the favourite – longshot bias, no-one can say definitively why it remains in existence. Some analysts put it down to risk-taking behaviour and the propensity for many people to seek big returns for a relatively small outlay. 

Others say that most people are simply not capable of differentiating between small and tiny probabilities. Therefore we (incorrectly) price both similarly.

Not only does the favourite – longshot bias occur in the horse racing industry, but also in sports betting. An analysis of UK bookmaker William Hill’s football betting odds over a seven year period showed that favourites lost 12% on turnover but underdogs lost 16%. The best performing market segment was backing teams at $1.50 or shorter – they lost just 5% on turnover. 

Short-priced favourites

Long-term betting records on Australian horse racing shows a perfectly correlated pattern. Favourites lose the least, second-favourites the second-least and so on. The rate of return decreases as price increases.

Favourites were clearly the best betting propositions. But this fact contradicts much of what we’re taught when first getting involved in betting. Many punters assume that horses hard in the market are unlikely to be good value. That;s an incorrect assumption.

The favourite – longshot bias has existed for many years in racing, sports betting and financial markets. It’s unlikely to disappear any time soon. So as a punter how can you use this favourite – longshot bias to improve your own results?

Consider trying to focus on short-priced favourites rather than trying to back that elusive longshot winner. Use the bias to your advantage. Focus on horses that are in the market and your results should improve immediately.

In summary:

  • As a rule: the greater the price, the greater the edge you have working against you.
  • Profitability is perfectly correlated with price. Favourites are the best performing segment of the market. The best returns you will get (as a group) are horses hard in the market.
  • The fastest way to burn through your betting bank is to focus on longshots.
  • Rather than trying to snag longshot winners, you are likely to get better results by focusing on fancied runners and a sound money management plan.

Pro-punter Cameron O'Brien knows how to find value winners at big prices. He's done it time and time again for his Key Bets members. They get all of Cameron's tips from right across Australia, including stake, recommended price and runner comments.

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