Bettors' Top Three Data Elements

I chanced upon a study by a Bentley college grad  focused on whether or not the horse betting market exemplifies underlying principles of the efficient market hypothesis (EMH); author Jillian Raia’s work is very thorough – both on the EMH front and the handicapping front. “The research demonstrates the horse racing market is efficient in both the weak and semistrong forms, she determines, but highly inefficient in the strong form.

She concludes the interplay between dedicated handicappers and casual sports bettors helps pull the market towards efficiency. In action too is something she describes as a favorite-longshot bias, which I familiar too much I am with.

For a casual bettor, there are many lessons to be learned through the analysis of market efficiency. To begin, because the horse racing market is efficient in the long- term one should not bet on every race. Instead, causal bettors should try to incorporate as much available information into their picks as possible in order to make an educated wager, and only place a bet when they see a horse that is mispriced. Our behavior plays a significant role in gambling, whether we like it or not. We bet on that longshot because of the excitement we get thinking of cashing in a money-spinning ticket. We overlook that favorite because we did not come to the track to make $5, but to make $50 or $500. Through these behaviors horses become mispriced, similar to the way securities in the stock market become mispriced, for “stocks are usually more than just the abstract ‘bundle of returns’ of our economic model” (Merton Miller as quoted in Thaler and Ziemba, 1988). Behind each bettor’s wager is a story or sentiment, unknown to the public. 

Shown above is a survey the author created in which she asked handicappers which were the top three data points (signals) they used to make their choice. Although the cropped image above is clumsy, you can see that speed factors are by far the choice of choice. Nearly all the data elements are part of a classic handicapping scheme.

Raia’s paper (Yay or Neigh: Is the Horse Racing Market Efficient?) is a clever juxtaposition of markets and races. Her summary of handicapping technique is spot on:

1) Take a look at each horse’s most recent speed figure and determine which one has the highest number for this “becomes the frame of reference for the entire race” (p.30).
(2) Next, determine if the distance and track conditions this horse is racing in today are similar to those that were present in the race in which he earned this noteworthy speed figure. This will be a subtle indication if the horse has the ability to earn a similar speed figure today.
(3) Subsequently, it is important to analyze the competition. Horses that do not have any speed figures similar to the horse you have chosen as your reference can be disregarded. By contrast, those who have similar speed figures or a speed figure better than the one pinpointed must be examined further.

Tune in again as we try out a severely customized version of this heuristic on two optional claimers held at Oaklawn Park in Hotsprings, Ark. on Mar 8


https://www1.drf.com/drfPDFChartRacesIndexAction.do?TRK=OP&CTY=USA&DATE=20190308&RN=6
https://www1.drf.com/drfPDFChartRacesIndexAction.do?TRK=OP&CTY=USA&DATE=20190308&RN=8