Favourite Long Shot Bias (And HOW To PROFIT From It!)
So, in this article I will be talking about favourite-longshot bias. What it is, What causes it and, most importantly, how we can profit from it!
This can be a bit of a confusing subject so I will try to make it as easy to understand as possible. (I hope!)
For this article, you might want to stay away from the nice cold beers and get some caffeine in you as you read this ?
Is betting as easy as just backing the favourites? Let’s take a closer look!
What Is Favourite-Long Shot Bias?
From searching around the web for an easily understood definition I managed to grab this from Wikipedia.
“In gambling and economics, the favourite-longshot bias is an observed phenomenon where on average, bettors tend to overvalue “longshots” and relatively undervalue favourites. That is, in a horse race where one horse is given odds of 2-to-1, and another 100-to-1, the true odds might for example be 1.5-to-1 and 300-to-1 respectively. Betting on the “longshot” is therefore a much worse proposition than betting on the favourite.”
This basically means that generally bettors (and traders!) often ignore favourites when they are short prices. (Think sub-1.50 favourites on the Betfair Exchange)
With most preferring to bet on the higher price simply because it is a higher price and thus can offer a bigger return on their money.
It can be easy to assume that if a price is short it is because every man and his dog is backing it which sucks all the value out of the price. Therefore, it is better to go against the favourite right?
But actually, this is what many others are thinking also and creates a bit of an ironic paradox.
After all, how many times do you overhear people on Social Media say that there is “no value” in backing those short odds-on prices?
Barcelona @ 1.12
Novak Djokovic @ 1.04
Any horse that is priced odds-on and so on….
Most recreational punters are much more interested in backing the bigger price. The payout multiple is bigger and it is also more memorable when they win. Remember, they are mainly betting for entertainment and would much prefer the dream of a big win from small stakes than regular consistent profits.
And with the phenomena of favourite-longshot bias it actually means that punters being happy to back underdog outcomes at bigger prices creates VALUE ON THE SHORT PRICES.
The Role Of Bookmakers
Bookmakers have been aware of this long before the betting exchanges came along and have always priced their markets accordingly.
We often look at bookmakers of today offering what we call “bad odds” compared to what is on offer on the exchange. For example, an underdog priced @ 20 on the Exchange might be around 15-1 on a mainstream bookmaker like Paddy Power.
There can even be cases where some outcomes are 200-1 or up to 1000-1 but they cap it at 100-1 on the bookmakers.
And you will often see a HUGE discrepancy in the prices if looking at higher odds bookmaker prices compared to shorter odds.
You might think this would cause an exodus over to the exchanges but you have to remember that recreational punters have no awareness of the differences or even of the concept of value.
They just see a “big” price and take it.
They aren’t even trying to work out if there is value in the price let alone shop around for a better price.
The bookies know that and take advantage of it.
They also know they have to be a bit more competitive at the shorter prices in order to make them more attractive for recreational punters to bet on which is why you don’t see such huge discrepancies in the shorter prices when comparing prices on the exchange to the bookmakers.
The Role Of The Exchanges?
With a tighter overround and punters backing against other punters you might think that such a phenomenon would not exist on the Exchanges and we would see the “true” prices on these events.
And you are probably correct for the most part.
But even though the bookmakers are not setting the prices, you still have to factor in human psychology.
After all, would YOU prefer to back a 1.02 shot? Or lay it?
Therefore, you would still think that favourite-long shot bias might still exist in the markets and create value.
Where Is The Value Then?
But of course, it is not as simple as reading this article and thinking that suddenly we should just go out and back all the short-priced favourites.
We need to look further into this and try to identify the occasion when favourite-long shot bias might be prevalent.
And for that we need DATA.
And lots of it
And so this led us on to a huge study that we did for the Trend Report where we wanted to see if this exists in the sport of tennis.
It is often mentioned in betting circles that tennis is a sport which favours the favourite, especially in grand slam tournaments.
For example, with so much public interest and lots of mismatches you might find the recreational punter much more interested in backing the 20-1 underdog rather than Rafael Nadal at 1.01.
And if this theory is correct it could possibly mean lots of value available on these favourites even at 1.01.
And a strategy of laying underdogs could be profitable?
So we used our tool to initially look at the tournament as a whole if we were to LAY all the underdogs.
If favourite longshot bias exists then we could surely make a profit laying all the underdogs.
This tool would look at how this system would have worked over the past 10 years.
You can see that doing this blindly would actually lose us money.
However, if you look closely you will see that this strategy could be quite profitable in the 1st round of the tournament.
So we played around with it and filtered it down to specific rounds and specific odds ranges in order to find a profitable angle.
And by tightening up the criteria we were able to find a system of laying specific underdogs at specific times of the tournament that would produce an average profit of £552 (5pts) per tournament using £100 stakes.
With an 80% strikerate and an average of only 27 bets to place.
Not bad for what is probably about 20 minutes work total placing those lay bets.
We also found a similar trend in the women’s side of the draw for Wimbledon.
And again, in the US Open.
This leads us to tentatively conclude that favourite long shot bias still exists in the exchange era but you have to look deeper into specific odds ranges. After all, punters will be much more interested in backing an underdog @ 6 rather than 3!
The Trend Report
Our reports detailing the precise details of the systems we found for Wimbledon and the US Open alongside much more are available inside the Trend Report package released this Friday.
The first emails will be sent out on Friday June 25 with a link to buy the package and it will be taken off sale on June 27.
We won’t be limiting the amount of copies available during that time but we WILL be limiting the amount of coupon codes available.
The EARLYBIRD coupon codes will offer the BIGGEST discount that will ever be available on this and you have to get your code in advance NOW by submitting your email address below.
There will be NO more EARLYBIRD coupons released after June 24 so you have to get your code in advance.
If you do this late then there will be a limited amount of LATEBIRD coupon codes too (with a smaller discount) but after that there will be no more.
If your submit your email address then you will get an email with your code that you must keep safe.
Feel free to follow up if you do not get a reply.
Watch the below video to get a quick look inside the package!
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For Lay underdog? Trend Report in tennis did this include grass, clay, hard, you specifically mention Wimbledon and US Open. You do not speak about a specific surface are all grand slam tournaments played on grass.
It just specific for those tournaments. So Wimbledon which is grass and then US Open which is hard court. If you have any ideas for things you want us to look at in future feel free to let me know!
Italy vs. Austria today (06/26/2020) is a good example for this. 1.55 for Italy is absolutely too high. I would have set the price to 1.25 max. 1.35. That doesn’t mean Italy will win for sure, in football anything can happen. But here, in my opinion, you sure get good value at 1.55 for a very, very big favorite.
One thing to keep in mind is the markets are factoring extra time into the equation. You often see bigger prices on favourites due to this, they might get the job done after full time