A Study of Betfair Place Odds

Further to my review of Beat the Racetrack for place pricing on Betfair, I present a brief study of odds in the Betfair horse racing place market.

In the chart below (click to enlarge), we see two lines representing the expected percentage chance of placing in a horse race, derived from the Betfair place odds, and the actual percentage of horses placing, derived from results.

There is a good fit between the public's perceived chance of a horse placing and the actual outcome.

The data for the chart came from the following table (click to enlarge),

where Rank is the percentage range in which the odds fell. Exp is the expected percentage chance of placing and Act is the actual percentage of  placers from the racing results. There were 8193 runners in the sample.

There follows a similar chart (click to enlarge) derived from the Henery place model for the same runners in the races charted above.

As you can see, there is no discernible difference between Betfair odds and the Henery estimation. The Betfair place market is efficient enough to prevent the use of place pricing models to improve upon the public's perception.

This doesn't mean to say that runners can't be filtered out as being value bets (as in the win market) but you won't achieve it using any of the Tote place/show market pricing models.

Beat the Racetrack

Here's a golden oldie from my library. Published in 1983, Beat the Racetrack was written by two giants of the mathematics of horse race gambling, William Ziemba and Donald Hausch. The book concerns arbitrage between the win market and the place, show and exotic betting markets of the Tote (Pari-Mutuel).

I keep my eye on many horse racing forums and know there is a lot of new interest in using the Harville and Henery price placing models on Betfair. Let me save you some time. Using Harville, Henery or any other model won't work on Betfair. Why? Because the Tote and Betfair are two entirely different kinds of markets. Only in the Tote can you get the kind of price mismatches that allow the 'Dr Z' method to work. In the Tote it is quite feasible for there to be a place or show price that is almost as large as a win price thus creating a statistical arbitrage.

On Betfair, the win and place markets are akin to bookmaker's books rather than a tote. The win market overround will be close to 100% and the placemarket will be close to (100% * places), where 'places' is equal to the number of horses to finish in the money. In tote betting the odds are not set until the betting is over and the place/show market payouts are not settled until the race is run. Because of that, the place/show markets are prone to exploitable inefficiencies. In Betfair place market the prices are known before the race starts and so there are no gross inefficiencies between the Betfair win and place makets. If there were inefficiencies then they would be traded out by aribtrageurs.

There are small differences between the place price and the expected price on from any of the models (Harville, Henery etc.) on Betfair but not enough of a difference for any profits to be made. Each tote market, be it win, place, show or exotic is independent of the others, which allows for price deviation. That is not the case of Betfair win and place markets. If you have access to real time Betfair feeds (not the Betfair website) then you will see the Betfair win and place markets follow each other in lockstep. Sorry to be the harbinger of bad news but the Betfair place market is as near efficient as the win market. You will have to look elsewhere for your betting loop-holes.

Further Reading

See A Study of Betfair Place Odds for more on using the Henery pricing model on Betfair and why it won't work.

Braddock's Complete Guide

...to losing money. Apart from this book, I have no books on handicapping. Let me give you a biography of my life in betting to explain how I came to own this door-stopper. Once a week, when I was a young child, my father would call out to me and ask for numbers between 1 and 55. Eventually, I wanted to know what for.

I asked and was told that my father was filling out a thing called a football pools coupon. He was selecting draws, before the days of personal computers and calculators, using a random number generator. Me! This got me interested in numbers and probability from a very early age. How was I influencing the course of a football game by guessing numbers between 1 and 55?

When I turned 16 years of age the ZX81 had started to usher in the UK home computing craze. I asked for a ZX81 on my birthday, because "it would help me at school". Well, it helped me to swap computer games at school but little else. One piece of software that I got for the computer was a pools prediction program. Of course, it didn't predict anything. Nor did the Course Winner horse racing software I bought a year later for the ZX Spectrum that I had upgraded to.

My horse race betting activity, during the 1970s, consisted of betting each way on Red Rum for the Grand National. Five bets, five wins. I thought I was a genius. I didn't have any real knowledge about horse racing (I am no more clued-up today) but I wanted to know more. One day, I was in WH Smith and noticed Braddock's book. I snapped it up, imagining untold wealth. I fiddled around with writing BASIC programs based on some of the nonsense mentioned in the book but gave up after a week.

A few years later, I came across The Punter's Revenge and so finally, I was on the straight and narrow (but incredibly long) road upon which I find myself today. This afternoon, wanting a little reading material to read whilst sitting on the porcelain library chair, I noticed Braddock's book and thought I would look at it. What nonsense I read! "Never bet odds-on." and "level staking is the only sensible form of betting" were some of the wise words to be had. There was, of course, all the usual nonsense about selecting one horse over all others to win the race. Who cares?!

On looking for a picture of the book on Amazon to decorate this posting I was flabbergasted to see that Braddock's book is still in print after all these years and updated too. I looked at the contents on Amazon and it's the same book! Well, there are 9 additional pages on bet exchanges. I can't imagine what Braddock makes of Betfair. If I ever see a copy I will take a look but you can be sure I won't buy the book. A dinosaur of a book for a dinosaur age.

I have no books on form or handicapping. Everything I need to know about a horse is already in its somewhat efficient price. I don't care who owns the horse, who trains or rides it. I don't even care if the nag has only three legs. If it's the favourite then it must be a damn fine horse to be running on three legs! With the price, standard economic principles and a peer-to-peer betting exchange, we can get to work on turning a profit. Form is irrelevant.