Wednesday, 19 August 2009

Wall Street Baseball

Sports investing isn't the only kind of investing I am interested in. I follow the stock market as well, although the level of my interest is totally dependent on how well it is doing! My day-trading / commoditities / options days are long behind me, but I do regularly check the financial pages and occasionally find something of interest. Here, from the Wall Street Journal was something from a couple of days ago.

Is Your Ballclub a Better Bet Than the Market?

Betting exclusively on your favorite ballclub is about as logical as investing your life savings in the company headquartered nearest your home address. Then again, some people live down the street from Google.

According to the sports book, placing the same $100 wager on your favorite baseball team before every game this season would lose you an average of $336. Even teams with winning records, like the Boston Red Sox or Tampa Bay Rays, would have lost money on the year. Since these teams are good, they're generally favored—which means they pay lower returns when they win.

Not every fan who bets this way would be disappointed. The Los Angeles Angels, for instance, would have paid out a MLB-high $2,128—a return on investment slightly better than what the Dow Jones Industrial Average delivered over that period. The Texas Rangers would win gamblers $1,657, and the Los Angeles Dodgers $934. Those three teams have something in common: They're winning teams that gamblers underestimated.

When too many gamblers bet against a team, bookmakers change the odds to encourage more people to bet the other way. (Bookies like the same amount of money on each side of a bet because they break even on the bet itself, and make a guaranteed profit on the commission.) As a result, the same $100 wagered each day on the underestimated Angels this season paid significantly more than one on the overestimated Red Sox. It's the same reason the Chicago Cubs have won a majority of their games, yet are among the league's worst teams to bet on. The fact that both the Red Sox and the Cubs are popular ballclubs with legions of biased fans doesn't help the odds, either.

Eventually, the underestimated teams start gaining respect, and the gambling world finds an equilibrium. Don't expect bets on the Angels to win quite as much money in the second half of the season, says Richard Gardner, sportsbook manager for "Bettors have taken notice and the lines have continued to climb," he says.
Probably nothing new there for experienced traders like us, but it's always interesting to see sports betting make the pages of more, shall we say, reputable publications.


John said...

First thing I noticed is that the top three teams on this list play in one of the west divisions. In fact six of the nine teams that play in the west divisions are profitable on this list.

Since their games are on later some of the betting public doesn't see these teams and they fly under the radar if they are playing above expectations... or perhaps it's coincidence.


Cassini said...

I think that's a very good point actually. The focus tends to be on the Yankees and Red Sox, Cubs and White Sox too to a lesser extent - if you look at the schedule and see the late game every Sunday over there, it's not often a team from the west involved. Laying popular teams is often profitable as I have written before, so I was a little surprised to see the Yankees showing a profit.