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.