Heard of favourite-longshot bias?
Read about the betting market flaw which “floors” so many punters
If you’ve been punting for a while…
The favourite-longshot bias (FLB) is something that without doubt you will have experienced, and you might even be well aware of its existence already (but don’t necessarily know its exact name).
And for one or two newbies, it might be a phenomenon you never knew existed within the realms of sports betting.
But it plays an important part in the way bookmakers frame their markets and how we, as backers, can be misled by the odds we see.
All of which can lead to us getting poor value.
And, as we know, value is everything when it comes to making a profit from betting.
So what’s it all about…
What is favourite-longshot bias?
There’s actually quite a bit on the internet about this market feature, and I would urge you to check it out for yourself.
But to save time, I’ve leant into a few articles that I’ve read myself on this topic.
Here’s one such definition, which sums up FLB quite nicely. It comes from a website called sportstradinglife.com and it reads…
“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 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 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 favourite-longshot bias it actually means that punters being happy to back underdog outcomes at bigger prices creates VALUE ON THE SHORT PRICES.”
Does this sound familiar… or at least make sense when you study the betting markets yourself?
I see it often in outright golf markets, in some horseraces too.
What this means in plain English
Simplifying things considerably…
The FLB phenomenon basically means the bigger the price of a bet, the worse value it is. Or the more likely it is to be.
So, for example, the 40/1 bet you’re backing actually has true win odds of 50/1… a 66/1 shot really should be 80/1… that 150/1 outsider you fancy, well, it’s a 200/1 chance at best.
These are just illustrations of the point.
But what these numbers highlight is the fact that the bigger the price you see about a bet in the market, the greater probability that the bet in question is underpriced (and so poor value).
And as we know poor value = losing money.
Big claim Matthew, got any data to back this up?
Well, I was on the Pinnacle website as it happens, and came across an article by Joseph Buchdahl – who has written widely on all matters betting-related.
This is what he cited in his piece about favourite-longshot bias…
“There is now considerable evidence from the world of sports betting to show that long-shots are disproportionately shorter relative to their fair prices than favourites, from horse racing, football, tennis and other minority sports.
A 1997 paper in The Economic Journal by Leighton Vaughan Williams and David Paton from Nottingham University Business School found a strong favourite–longshot bias in a sample of 4,689 runners in 481 races during the 1992 UK flat racing season.
Betting runners priced shorter than even money (2.00) experienced losses of just 7%. In contrast, betting long-shots at over 40/1 lost over 40%. A paper published by Michael Cain, David Law and David Peel in the Scottish Journal of Political Economy in 2000 found clear evidence for the favourite–longshot bias in a sample of English and Scottish football league matches played during the 1991/92 season, with just 2% losses betting at shorter than 1.66, but 15% losses betting over 5.00.”
Now this article was published in 2016, and the data studies above weren’t exactly done yesterday, but there is every belief that the underlying trend among bookmakers, and the markets they offer, hasn’t changed significantly in the interim period.
What are the reasons for FLB?
Thinking about it there can be a few logical explanations behind the favourite-longshot bias.
Here are three possibles…
(1) From the perspective of bookmakers, they clearly have an over-riding priority to limit payouts. This is their MO after all. Take as much in, pay as little out.
And so if they can chalk up any bets below their true odds, they will. And shaving points off bigger priced bets is a simple method of decreasing their liability about any given market.
After all, why payout at odds of 80/1 when you can get away with settling at 66/1?
(2) As far as many punters are concerned (not all I hasten to add) once they see a big price about a horse, or a golfer, or a potential football result, they immediately fixate solely on that price – and the potentially large payout coming their way – and cease to apply any rational assessment of the actual true odds of this outcome happening.
As a result, they convince themselves, almost in reverse, that the bet’s a good one… just because it’s a big price. The thinking being, golfer XYZ is 100/1, so he’s a cracking bet. End of discussion.
They don’t continue the thought process which goes: “I know this guy’s 100/1, but actually taking into account all the known factors like current form, course record, career experience, field strength etc, he should really be 200/1, minimum”.
If they did… they’d walk away from what is in reality a poor value bet.
But, no, 100/1 = big payday. Let’s have some of that!
(3) Market efficiency – possibly. The logic here being that the more money which is placed on a market, the more efficient it is. In other words, the more accurate the comparison between price and winning chance (and so value).
Where little money is being placed, and outsiders tend to attract less interest, then it becomes harder for the market to accurately reflect the chance of a potential outcome. It therefore becomes more of a “finger in the air” process. On both sides.
So what are the chances of Finland winning the Euros? Or the No.472 on the world ranking landing the Wimbledon title? Italy winning the rugby World Cup?
How easy is it for the betting market, or the bookmakers themselves, to price up the probability of such an unlikely occurrence. Probably not that easy at all.
But…
Away from the main High Street firms, there are frequently examples on the likes of Betfair where underdogs are genuine value.
Individuals who are a little more polarised in their opinions, and don’t necessarily have a full grasp of the facts, or the ability to create an accurate tissue, do occasionally offer no-hopers (well, what appear to be no-hopers) at all sorts of fancy prices. Often far bigger than the conventional layers.
These are worth sniffing out and can deliver bets which are both big prices and genuine value…
And these are the kind of bets we all want to be on!!
OPINION: So when it comes to favourite-longshot bias, in basic terms, it refers to the tendency for punters to over-value outsiders in betting markets. And so these rags tend to be over-bet, and their odds shorter than they truly should be… while favourites can often be under-bet and thus longer than they should be. Of course, there’s good/bad value to be found right through a betting market, at any price point, but if nothing else, an awareness of this phenomenon might just make you think a bit more about the true value of the bets you’re placing. And this can only be a good thing.
