Turkish Delight

Anonymous argues that

No, the market doesn't need to know your selections. If the price on a certain outcome is consistently incorrect, which you infer by the insistence your picks offer value, then you can expect the market to "correct" over a course of time (the old chestnut of market efficiency, or a form of).

It's an almighty IF to suggest your picks will continue to return 37% or so. Historically speaking, it's almost certain they won't. I don't know your sample size, but that figure seems to be based on just part of last season in which case the sample size is, of course, insignificant.

A big factor in draw expectations is obviously the total goals expected. I don't know for sure, but I suspect your projections fail to take this into account. The lower the goals the more likely the draw - obviously.

A salient point you make is "Draws will continue to hit overall at the rate that they have hit over many years". Yes, pretty much true, unless a big factor in the game were to change (e.g. extra points for goals scored or no points for a draw (ain't going to happen but I remember in the 1980s when the equivalent of the Conference, the Gola League I think it was called, offered 3 points for an away win and 2 points for a home win which should have changed the dynamics of a game. As did the introduction of three points for a win - which saw a pronounced increase in home advantage and, probably (haven't checked) an increase in goals and hence decrease in draws. Anyway, the point I was going to make is that the draw should indeed continue to hit at the same (well, similar) rate. And that rate sure as hell ain't 37%, even in the type of match you are predicting the draw in.

It's almost unthinkable that you can consistently hit at a % equivalent to a price of 2.66 on an outcome generally priced in the 3.3 - 3.5 range you mention. Sorry, but the market is never going to be that wrong in the modern age, at least not consistently.

Now, I'm not saying the draw isn't ever value. I think it is. But rarely is it the enormous value you make out. There are certain match situations - not confined to dodgy Italian results - which contribute to a likely (relatively) higher probability of a draw. But, in the main, this would probably involved getting a price of 3.25 or so on a 3.00 shot. Nice value for sure.

An important point which you haven't addressed is how you price the draw when your system predicts a draw. You can't simply back an outcome blind without looking at the price and, to the best of my knowledge, your system has shown no price sensitivity whatsoever.

Hope that helps.

I am unfortunately old enough to remember the introduction of three points for a win. It was introduced in England in 1981, but the number of draws there remained constant. However, in other countries, notably Turkey's top division when it was introduced there in 1987, the number of goals did increase quite significantly, (see picture at top), and draws decreased as a result.

I also do not intend to suggest that the ratings will continue to predict draws at anywhere close to 37.84%, (although I hope they do), but that percentage has a long way to drop before the strategy becomes unprofitable. I mentioned before that some draws are 'strong' and others 'weaker', and this is the number for the 'strong' draws only.

Drawing Hope

The draw debate continues, although it is spilling over into a broader criticism of Peter Nordsted’s book Premier Football Betting Handbook 2010/2011 which I haven’t actually read, so I can’t really make any comment about.

I do find it interesting though that some people are missing the obvious, which is that however he finds them, these draw selections of Peter's are value if backing them is consistently profitable, which his method appears to be.

When it comes to the draw price in matches “involving vaguely similarly matched teams” the price is in a fairly narrow range, with slight differences between leagues, so if the Elo ratings continue to predict draws at anywhere close to their current strike rate (37.84%), then a draw price in the 3.3 to 3.5 range is clearly huge value.

It is suggested that “If there has been value on these selections over this long period of time then you can be (fairly) sure the market will be, and has been, reacting”. Doesn't this rather presume that the market would somehow know what my selections were? Only my spreadsheet knows, and it only tells me when I enter in the appropriate numbers each week. Draws will continue to hit overall at the rate that they have hit over many years. Generally speaking, the price will not move unless the overall rate of draws increases for some reason.

Also, the draw price is arguably more stable than prices on individual teams, and is almost a pivot around which the home and away prices adjust. It's also been said that the draw is unpopular with backers, and although that may have been the case a few years back, I doubt that it is true now, especially on the exchanges. The percentage of drawn games has remained constant over the years, but even if the draw price on my spreadsheet’s selections were to drop, it would need to be a significant drop in price to make it a losing proposition.

Anonymous says "Your method of selecting draws is never going to select a draw in a "mismatch" or anything approaching a mismatch".

This is, of course, correct. Any objective ratings system that predicted a draw between two mismatched teams, after accounting for form and home advantage, would be one strange rating system. Maths doesn't work like that.

But having said that, by comparing the expected margin of victory with the prices available, the spreadsheet does often suggest that an expected winner isn’t value, so while not actually predicting the draw, we can infer that the draw and underdog prices are value, and lay the favourite. There is more than one way to skin a cat.

Looking ahead to tonight's big games in the Conference, and there is one draw predicted - Eastbourne Borough v Rushden and Diamonds at 3.55. Draw predictions in this league are hitting at exactly 33.33% this young season, up from last year hopefully the result of more accurate ratings!

Drawing Fire

As I mentioned on Saturday, quite independently, both Peter Nordsted and myself have arrived at a similar system based on backing the draw. Whereas Peter picks three matches every weekend from the Premier League, I am somewhat less restricted, looking for value draws across the top five leagues and with no target number of selections. Pete's system gave him a healthy profit last season, with an impressive ROI of 26.3%, and despite being ahead on this season so far, he has apparently come in for a fair amount of criticism.

Obviously I realise that anybody putting themselves up is going to get shot down but I wasn’t prepared for the comments I received shortly after landing a treble. I was being called a con artist. Lucky only because I had the treble and even claiming the method I was using to make my selections was wrong.

It seems to me that there are just people out there who for whatever reason just take great delight in critiscising every movement. I could understand all of this if I was losing money hand over fist but to be showing a nice profit and still to be criticized is bizarre.

However I will carry on giving my selections once a week and am open to any criticism just please come up with a viable alternative or argument as to why what I am suggesting is wrong.

Now admittedly, Pete is trying to drum up business for his subscription service, and indeed anyone who airs their thoughts and ideas in public is fair game for criticism, but there does seem to be a number of people who are far happier to criticise and find fault, than to offer up their own ideas and suggestions.

Take this comment as an example from the draw post:

As far as I can tell, both yours and PN's method of choosing draws simply involves finding two vaguely similarly matched teams and betting the draw at any price? You say your system is good at finding value on the draws - but what are you defining as value? You simply appear to bet them whatever the price when they meet your loose criteria.

I haven't compared my draw selections with Peter's other than for last weekend, but it would hardly be a surprise if the majority of draws came from matches "involving two vaguely similarly matched teams". That statement in itself is too simplistic, certainly vague, and not even accurate. A team's recent form has to be a factor, as does it's home or away record. For example, are Birmingham City and Liverpool "vaguely similarly matched teams"? Most people would probably say not, (although since all matches used are league matches, arguably ALL matches involve two 'vaguely similarly matched teams') but Liverpool's poor form, and Birmingham with home advantage made the draw, to my mind at least, a value bet at 3.35 a couple of Sundays ago.

Was this a value price? We can never know for sure. The match will not be played over and over and enable us to determine more precise probabilities, but what we can do is look at the bottom line after a period of time, and if we are ahead, we can be confident that the selections are value, and if we are in the red, we are not finding value.

As for 'loose criteria', the rules for me are actually extremely tight. A draw is predicted when the Elo ratings for both teams stay closer to their pre-match values if the match is a draw, than they would after any other result.

Some draw predictions are 'stronger' than others, but all are profitable, at least for now.

There does seem to be an abundance of draws in the EPL this coming weekend, the strongest being the early game between Wigan Athletic and Wolverhampton Wanderers and the London derby between West Ham United and Fulham.

Defensive Indifference

Very little trading this weekend due to social commitments.

The draw hunting system again proved profitable in England with Fulham and Everton playing out a goalless draw. The other two came matches close with a 1-1 scoreline broken up with late away goals, but these things happen. One out of three guarantees a profit. France was also profitable, but no success in Italy or Spain which meant a small loss on the weekend overall.

Laying the odds-on favourite was a losing strategy in France, but profitable in Germany and Italy. It was extremely profitable in England, with Birmingham City, Liverpool, Manchester United and Newcastle United all failing to win. Arsenal of course also lost, but at 1.24 were excluded, although I did trade this game, making a small profit.

The other trading opportunity was the late NFL game between the New York Jets and Miami Dolphins. This game offered an interesting example of how the scoring of a touchdown, even late in the game, isn't always such a good thing to back at the prices on offer. The Jets led by one point with 2:00 left in the game, and one yard away from another TD. The price was around 1.05 at this time, but I figured that it might actually be better for the Dolphins to call 'freeway' (weak defence), and concede the almost inevitable TD sooner rather than later, which would leave them with close to two minutes for a final drive with the possibility of a TD and a two-point conversion to tie the game. It was a smart play to give up the early TD and preserve time.

I put up a lay for a few thousand at 1.03, hoping that the Jets would score quickly, and that some people would be unaware of the strategy, and sure enough the Jets scored immediately, and with the extra point, led by 8 with 1:55 left in the game - a long time in the NFL especially with a couple of timeouts remaining. The 1.03 was duly taken, (greed driving the price too low) but the price almost immediately went up to 1.07, as if the realisation had sunk in that the game was not over, (fear kicking in), at which point I traded out for a nice bit of green all over. The Dolphins started their drive very positively, and the price went as high as 1.2, but ultimately they came up short.

The SBP came up with a 1-2 record in the NFL this weekend, and still in the NFL, I was asked if I could recommend any books on trading the NFL. I don't know of any, but if anyone does, please let me know.

Back to real football, and a good weekend for Football Elite, with their one selection, Espanyol, winning at 2.28, and two from four short-list winners, at prices of 3.8 (West Ham United) and 2.04 (Mallorca) for a profit.

Drawing Encouragement

A busy football weekend got off to a good start with a draw between Koln and Hoffenheim backed at 3.5. The Elo ratings are particularly good at finding value on the draw, with a strike rate last year in the Premier League of 38.67%, although that figure includes cup matches between teams, something I am not tracking moving forward. I'm now backing the draw in the top European leagues, and only eight games in, but so far so good. Fifteen more selections this weekend. I like hunting the draw. Except for the occasional end of season Italian game, the price is always over 3.0, which means of course that if you can hit a draw every three matches, a healthy profit ensues.

Pete Nordsted is having some success with a similar strategy in the Premier League, and has so far found at least one winner from three draw selections each weekend of the season. Of his three selections this weekend, two match mine (Blackpool v Blackburn Rovers and Fulham v Everton) but he has Newcastle United v Stoke City whereas my third selection is Wolverhampton Wanderers v Aston Villa. I should add that I don't look for three draws - that's just how it worked out this weekend. Some weeks I might have none, other weeks 10. Not likely, but I think it's a mistake to set yourself a specific number of bets. In France I have 5 (of 10) selections, in Spain 3 (of 10), in Italy 3 (of 10) and in Germany (including last night) 2 of 9.

Back to Peter's strategy, and the article says

The strategy uses a past history of team’s results to provide a series of matches likely to draw from the English Premier League. Each of the teams in the Premier League has been graded from A-D with A containing the Champions League hopefuls and D being the relegation fighters. Grouping the teams in this way allows the strategy to reduce the number of variables and account for promotion/relegation without interrupting the collection of his vital statistics.

Having grouped the teams into these categories, he will look for patterns and previous results from similar graded teams when it comes to the upcoming fixtures.

Although I don't take past results directly into account (they are in there as an adjustment to the ratings of course), the strategy sounds very similar to something I wrote about almost exactly one year ago!

Scientific Bullshit

Great news! From the SBP today -

Guess what? I'm an author now! That's right, I've got a brand new book being released on Amazon soon called How To Beat The Bookie: Scientific Betting In An Uncertain World.

My life is complete (well ok, not entirely) but it's still pretty cool. Even cooler?
Since you're a subscriber of mine I want you to have a free copy. Just click
the link below and follow the instructions and it's yours.

http://richallensports.com/land/optin/

Pretty simple, huh? In the book I share all the inside information I've picked up from being in the sports betting industry for over 15 years. Grab it for free before Oprah recommends it and I have to start charging mega bucks for it ...

If anyone is interested in a free copy, just shoot me an e-mail.

In the Chapter "The Future of Sports Betting" - It Just Got Easier, he has this to say about Betfair (spelling mistakes not mine, by the way)

In May of 2000, Irish betting firm Flutter brought the idea of a betting exchange to the United Kingdom.

They soon merged with another competitor Betfair, and together under the Betfair umbrella the company has risen to become the world’s large st betting exchange.

Betfair’s premise is pretty simple: two counter parties bet directly with one another and the winner pays a commission on winnings — typically 5% but sometimes lower. The company claims 20–40% better odds for bettors than traditional sports books. Again democratization takes place here.

Bettors are paired directly with each other and now face more friendly odds because they are paired with other bettors online. Betfair isn’t taking a side as did the Las Vegas Casinos in Steven Levitt’s study, they are merely playing match maker.

Established sports books have come out in force against Betfair for the company’s concept of “laying” horses. Horse bettors, or “Punters” as they are known in Europe, can bet on specific horses to win or lay (not win). Unfortunately, this takes the barriers to corruption down a few notches as it is much easier for a jockey to lay his own horse in silence and not win than it is to devise a conspiracy involving multiple horses.

Betfair counters this criticism by pointing out that it doesn’t take cash bets from clients and no one is allowed to have anonymous accounts — bettors need to produce identification in order to bet. In 2007, Betfair voided all bets on a tennis match between Martin Arguello and Nickolai Davydenko when rumors of fixing surfaced.

Betfair has established a strong presence in England and is expanding throughout the world. They also have a poker product with better odds, and even operate a site called Zero Lounge where table games offer a 100% payout — no house edge. It’s easy to see why Betfair has, in a fairly short time, become the largest betting house in the United Kingdom, where betting has existed for hundreds and hundreds of years.

The firm has simple become a matchmaker, and through technology has paired bettors with one another allowing for better odds than the previous betting model. This model will certainly continue to proliferate throughout the world. This is all very good news to the skilled bettor. The reduced odds in this democratic model make it almost a certainty that a skilled bettor, following a solid betting model and smart bankrolling, can win.

There are actually a few interesting snippets in there, although I find spelling mistakes very distracting. I'm not immune to them myself, but you would think that a real 'author' would proof-read his stuff and have another set of eyes review it before publication. "11–13 pioint favorites..."?

Betfair's Future

Some interesting comments in this article from the London Standard including comments about rival exchanges, and Betfair's future: First the bad news: customers who love the Betfair website and want a stake in the company's future success will not be allowed to buy shares in the float.

Chief executive David Yu says they thought about allowing retail punters a slice of the pie but decided the “logistics” of such an operation made it not worth the hassle. So while large institutions will get to buy into the company, the rest of us will have to wait until the shares start trading before we can place our bets.

For a consumer-facing business, one that can reasonably claim to have shaken-up a tired industry in the public interest, this is a disappointing call.

Doubtless it would be expensive and fiddly to set aside shares specifically for small investors but not impossible. Google, another internet company with which Betfair would doubtless like to be compared, managed it with seeming ease, earning kudos along the way as an outfit willing to defy Wall Street in favour of the little man.

Betfair's decision suggests a slight lack of care for the customers that have made it the undoubted triumph it is.

In turn, this is how the company could be weakened. Asked what was to stop a rival — Ladbrokes, say — from hiring a bunch of computer whizzkids, devising copy-cat technology and launching a service called, let's say, GambleSmart, the Betfair bosses more or less replied: nothing at all.

They reckon that over the course of the past 10 years many such rival ventures have tried and failed to eat Betfair's lunch.

Yu told me: “We've seen about 50 exchanges come and go. Every single one of them copied the format. The brutal reality is that it is incredibly difficult to do.”

Perhaps. But one side effect of the float is that Betfair now has to make available a huge amount of information about itself that it could previously keep under wraps.

That information — including numbers about sales and profits — is likely to prove mouth-watering to wannabe competitors.

Somewhere in the mind of a net entrepreneur exists the company that will do to Betfair what Betfair did to traditional bookies.

The company is perfectly aware of this. Indeed, one purpose of the float, albeit of just 10% of the shares, is to give Betfair a currency to retain and attract talent. In an industry moving as quickly as this one, it may well need it.

In the meantime, where is the growth coming from?

The company was today flagging a move into online financial trading via an exchange platform called LMAX.

Punters will be able to take positions on financial markets via contracts for difference.

It might work, but this is already a well-populated field for the present size of the market.

A whole new customer base needs to appear for it to thrive.

Such gripes aside, Betfair has clearly been a huge success story. The future is harder to predict.

Late Goals

I suggested on Tuesday that "Bologna look way over priced at 2.63 to beat pointless Udinese", and while they were arguably anything but way over priced, for once, luck went my way, as Bologna won it in the 90th minute, after going 0-1 down to an early goal. It often seems that these late goals always go against you, but in the long run, it evens out. Catania, tipped as value at 2.14, won a little more easily, 2-0 v Cesena. The Elo ratings had two matches in Serie A to finish drawn, the games at Lazio and Lecce, to complete a 4 for 4 night in Italy.

Only one bet in Spain. The Real Zaragoza v Hercules game was predicted a draw, and at 3.6, was another good win.

In Germany, things weren't quite so good, with the lays of Borussia Dortmund and Bayer Leverkusen both losing, and the predicted draw for Freiburg v Schalke '04 going down after an 87' winner for Schalke. It often seems that these late goals always go against you, and yeah, that is definitely true!

Overall a profit, and one can't complain about that. Football Elite had Freiburg to win, so a loss there, but two out of three for the midweek short-list at 3.5 and 3.65 made for a good couple of days.

I mentioned the Sports Betting Professor's College Football record on Sunday, and my dry comment was that "No doubt he will somehow turn that record into an amazing 5-0 system win! ...So his full record for the new season is a less than impressive 14 wins, 24 losses."

Quite comically, except that some people actually fall for his nonsense, his NCAAF update today opened with this: "

Well we added 3 more system wins last Saturday in the Original system as Vanderbilt, Arizona St. both won as A bets and UCLA won on a B bet. That brings the Original system record up to 9-1 on the year."

So 8 wins and 10 losses = 3 system wins, and an overall record of 14-24 becomes a 9-1 record. Unbelievable really.

A couple of comments on my post about Betfair's flotation. Jason of Smarkets suggested that

Smarkets is growing to become a viable alternative to Betfair. Apart from our current 1% commission offer, we're looking at ways to further disrupt the business model. Premium Charge is an abuse of Betfair's market position.

Smarkets is growing, but can they ever become a 'viable alternative to Betfair'? As Betfair said in their Press Release, they have first-mover advantage, and the second comment from Scott sums it up the situation well

No rival exchange has made a profit or a dent yet, zero reason to believe another one will do anything but join the long list of carcasses left behind. The barrier to entry - marketing and tech costs - is beyond any start-up.

As for Scott's other comment that "Prices can still improve on less liquid markets, there are plenty of those around" he is, of course, quite right. It is the liquid markets where the prices can't be improved, but the fringe markets, and even formerly relatively liquid sports like the NHL and baseball, where liquidity should be improved. Personally, I think the increase in in-play delay time hurt the ice hockey. Five seconds is an age in a fast moving game like ice hockey, never mind the 7 or 8 it increased to a couple of years back. And why are there not thousands of Canadians in these markets?

Betfair sometimes don't seem to help themselves either. For example, in the NBA last season, they would offer three over/under totals markets, at say 190.5, 200.5 and 210.5. While the US Sportsbooks simply adjust the line, and keep the risk / reward the same, the prices on Betfair adjust while the line stays the same. We're all capable of working with that. When they keep adding lines, it simply dilutes the market.

The AFC Wimbledon v Crawley Town match whets the appetite tonight. The raw numbers have AFC Wimbledon at -0.5, but Crawley Town are in form, unbeaten since opening day, and of course, top of the table for now. I have a small interest on the draw at 3.55.

Listing

To the surprise of no one, Betfair have announced their intention to list on the London Stock Exchange and to proceed with an IPO of shares.

A couple of highlights from their official press release:

Betfair benefits from having a first mover advantage in sports betting exchanges: as the Betfair customer base and community grows, liquidity in Betfair’s markets increases, offering more choice and improved prices, which in turn attracts more customers, leading to higher levels of liquidity and improved prices.

I'm not sure how higher levels of liquidity in already liquid markets can lead to improved prices.

Betfair has a loyal and stable active customer base which generates both growing revenues and significant cash flow. As at 30 April 2010, Betfair had generated £355 million of operating cash flow since its launch in 2000, had approximately £151 million of net cash reserves and no debt. In addition, as at 30 April 2010, Betfair held £284 million of customer deposits.

Perhaps not as loyal and stable as they were three years ago. The Premium Charge upset a lot of people, and a viable alternative offering lower commission would seen see a stampede.

Geographic expansion—In addition to growth in new customer segments, Betfair will continue to pursue growth internationally, where its market penetration is currently lower than in the United Kingdom. This growth will be pursued in line with Betfair’s measured and prudent approach to regulatory compliance and based on a commercial assessment of the cost and resource implications of entering new markets. While Europe and Australia provide potential for growth in the foreseeable future, in the longer term there may be development opportunities in some of the largest gaming markets in the world which are currently highly restricted, such as the United States, India and China.

The mood may be changing in the USA, and the cricket scandals may help to loosen restrictions in India.

Freak Show

Football Elite had one short-list bet today, and Hannover obliged at 3.7 with a healthy 4-1 win. He has a couple more short-list selections tomorrow. My ratings actually had Hannover - Werder Bremen as a draw, but the Bundesliga strike-rate on draws is just 25% so I went with FE's selection and that proved a good decision. Mainz were layed at 1.99 but won 2-0 to drop the ROI on the Laying System there to 75.74%.

The Elo ratings saw a little action in the lower leagues, leaving the League Cup matches well alone. Of the two games in League One, and the eleven in the Conference, five were predicted as draws, and three of those five finished that way - the games at Dagenham & Redbridge, Darlington and Gateshead. The matches at Altrincham and Hayes & Yeading United were misses. AFC Wimbledon v Crawley Town on Thursday is also predicted a draw.

I mentioned a study into the "well documented NFL home-underdog anomaly" in a post recently, and a little more research tells me that between 1980 and 2001, (the data is a little old), just 48.8% of home favourites and 46.7% of visiting favourites covered the spread. Steven Levitt, of Freakonomics fame (check it out if you haven't already), found that bookmakers are well aware that more money (approximately 56.1%) is bet on favourites than underdogs, and so skew the line to take advantage of this fact, and increase profits.

Autumn Spaghetti

A quiet day on the football yesterday, with just the one bet on the Elo ratings, a draw Deportivo la Coruna v Getafe, paying at 3.3.

Looking at the midweek Serie A schedule, and this has the makings of 'what am I missing here', but Bologna look way over priced at 2.63 to beat pointless Udinese. Neither team has yet won this season, but Bologna are coming off an impressive draw at AS Roma, while Udinese, formerly strong at home, were firmly beaten at home 4-0 by Juventus last time out. The Elo ratings have Bologna at -0.5, and this looks a cracking bet.

Newly promoted Cesena may top the official table, but in the closely watched Cassini table, they are a lowly 17th. Catania, one of the best teams at home in Serie A, are 2.14 to win, and again, this looks value.

Strictly By 'The Book'

Autumn, historically a strong trading season, doesn't start officially for a couple more days, but my investing took a big turn for the better on Sunday.

Chelsea duly obliged at 2.6 winning the Asian Handicap -3 at a stroll. It's not often that these bigger spreads are covered by half-time, and in the end the surprise was that the margin stayed at just four.

The system lays of the Manchester teams both lost, dropping the ROI on this system in England to 40.94%. Lille won in France, and the ROI there is now just 14.64%. Bayer Lekeverkusen at 1.44 did fail to win, and the league that the strategy historically is most succesful in, now has an ROI of 100.85%.

Just for interest, I am monitoring the results in Italy, and after just a few games, eight to be precise, the returns there would have been higher than even the Bundesliga at 102.18%. The other country I am not betting on, but monitoring, is Spain, where the ROI there would be -54.01%.

Football Elite had a poor weekend, with both Recommended Bets of Blackburn Rovers and Sampdoria failing to win, and two winners and two losers from the Short-List selections. Sampdoria did lead late before conceding goals in the 84' and 87', but these things happen.

For the first time this season, I was able to trade an NFL game, the Dallas Cowboys v Chicago Bears. As I tipped up yesterday, after the first touchdown, the price hit a ridiculously low 1.16 for a few thousand, and in the NFL, you won't go too far wrong laying at those prices. It was especially crazy given that the margin was only four points as a Bears Field Goal had opened the scoring. As Chicago began their drive, the price was in the low 1.2s. It was a relatively easy game to trade, and the end result was my single biggest win since early May.

In the late game, New York Giants @ Indianapolis Colts (I have the Colts -10.7 in this), the Colts scored the first TD to take a 7-0 lead, and the price dropped to 1.32. Before the kick-off had been taken, you could back at 1.34.

The SBP went 3-1 on the NFL for the day, but just 1-1 for his 'strict system picks'. It can only get better.

I've started reading "Binary Betting" by John Piper. The author has a background in trading the financial markets rather than the sports markets, but it's interesting how he treats the two the same, a sign that the sports markets are gaining mainstream acceptance as a legitimate investment opportunity. 

There was an interesting paper written on the subject of Mark Cuban's (owner of the Dallas Mavericks) plan to start a hedge fund and his intent for sports betting to be the investment vehicle of the fund. The study looked at how easy it would be to turn the "well documented NFL home-underdog anomaly" into a modest 6% ROI, (conclusion: not that easy) but it did offer an explanation as to why short-priced favourites are underbet -

The number of additional wins to achieve abnormal profits is less for long shot bets than for short favorite bets by nearly a half in this example. The significance of this is that a bettor only needs to find slightly more than one additional winner per 100 bets for long shot strategies to produce significant profits but would need to find more than two additional winners per 100 in picking short money favorites. That seems like twice the work and could explain why short money favorites are typically underbet.

I found a little liquidity on the Los Angeles Dodgers v Colorado Rockies game, possibly bored NFL traders in between games. The money certainly didn't appear to be smart. In a tied game, someone wanted to back the Dodgers at 1.25 for £240. Per "The Book", that is a value bet to take (see below), and when the last two outs were made to take the game to extra innings, my 4-1 shot was trading at evens.

"The Book - Playing The Percentages In Baseball" by Tom Tango, Mitchel Lightman and Andrew Dolphin, is invaluable for in-play betting on this sport. 

Example from above, the probability of a team winning a tied game in the bottom of the ninth, with one out and runners on first and second, is 0.717. 

One commenter recommended this book a while back, and not only is it an interesting read for a numbers man like me, but it's also been of practical use, and worth every penny. The pace of baseball, with its frequent stoppages between innings, or for pitching changes, allows plenty of time to look up the relevant statistics, providing your new wife hasn't assumed you've finished reading it, and placed it in the bookcase!

NCAAF - No Clue At American Football

The Sports Betting Professor's College Football picks were a much improved 8 wins, 10 losses yesterday. No doubt he will somehow turn that record into an amazing 5-0 system win! Last Saturday you may remember, he had one winner and nine losses, earlier in week two he went 1-1, and in week one, he went 4 - 4 with one push. So his full record for the new season is a less than impressive 14 wins, 24 losses. Anyone following these picks is getting badly burned. To hit the break even target of 52.38% for the season, he's going to need a better system than the one he currently has, which is worse than tossing a coin! I just hope he doesn't pick Arkansas to win any time soon.

His pro game tips are just as bad, 0-2 with one push from week one. For week two, you may be best served by avoiding the Bills, Chiefs, Buccaneers and Chargers. I don't ask for his e-mails, I don't pay for his tips, so I don't feel too bad about putting them up here. It's not like they're any good!

Extraordinary Claims

There are hundreds of thousands of people around the world who study the football markets, many of whom receive 'news' ahead of most of us, and some of these people back or lay as a response, and the market adjusts.

By the time most of us get the news, it is old, and the market has already factored in everything of relevance that is known. Without access to inside information, just what 'news' most of us are going to be able to use to give us an edge is a mystery to me.

One of this blog's readers, Romford Anonymous, makes the extraordinary claim that he has the rare gift of being able to "interpret and use the news" to his advantage, even after it has filtered through thousands of other people who apparently do not have this talent, or there would of course no longer be any advantage. "Not something that I would have a handle on", he adds. Well, no. Although arrogance and I aren't complete strangers, I think that claiming to be able to "interpret and use news" that has filtered through thousands before me would be a tad too much, even for me.

Romford's claim would mean that the Premier League markets are inefficient - in an efficient market at any point in time the actual price will be a good estimate of its intrinsic value - and while this may have been less true in the past than it is today, the latest studies show that the markets "appear to be associated with higher relative efficiency". In the Internet age, a huge amount of information is now widely available, and the ability to number crunch is available to anyone.

Admittedly, studies also show that an edge can be obtained by "bettors who are experts in the field but who do not have privileged information". While that conclusion was drawn from a study made on the horse-racing markets, I have no doubt that it applies to football as well, and if you are indeed that rare 'expert' then well done indeed.

However, extraordinary claims require extraordinary evidence, and while posting Anonymously isn't a promising start, neither is suggesting that 1.87 is "an horrendous price to lay at" based on nothing more than a rumour that turned out to be false as should have been apparent by the price at the time, or claiming that because it has never happened before, no Premier League team should ever be considered a three goal favourite away from home in the future

Romford Anonymous may well be a rare expert in the football markets, but the evidence suggests otherwise. Mere mortals such as myself, will continue using mathematics as the basis for an approach to unraveling the great puzzle of football betting.

EPL Efficiency

Another successful day for odds-on laying in England, with successful lays of Stoke City, Aston Villa, Everton and Arsenal. Tottenham Hotspur won, but a very profitable day for this strategy which now shows an ROI of 69.12% in England.

The two ratings selections both fell short, with Blackburn Rovers being held at home by Fulham, and West Bromwich Albion coming from behind to beat Birmingham City.

The Bundesliga saw one winner and two losses for the laying system, although Bayern Munich's failure to beat Koln at 1.25 was missed out on since historically lays at sub 1.3 prices are nor value (see favourite-longshot bias).

The one draw prediction from the ratings in Germany today was at Kaiserslautern where the game finished 2-2 at a price of 3.45.

In the one non-league bet of the day, Barrow beat Forest Green Rovers as expected.

Anonymous contributed two comments on my last post, concerning the lay of Aston Villa at 1.87.

The Villa game is a perfect example of why you can't expect to win purely off ratings.

Davies may miss out. Cahill and Jaaskaleinen are definitely out. These 3 are undoubtedly their 3 most important players.

It takes little time to research this information. Although it would take an impossibly long time to research it for all the leagues you try and cover.

Regardless of the outcome, 1.87 was an horrific price to lay. And some of the team information has certainly been available for some time.

Anonymous is a frequent visitor to the blog, so he should be aware that the lay of Aston Villa was NOT based on my ratings but on my observation that in the EPL (and other leagues), a strategy of laying odds-on favourites has been historically profitable in recent seasons.

Also, the price of 1.87 was that on Friday morning, and if one subscribes to the theory that the Premier league is an efficient market, there is no reason to think that this price was incorrect at that time. As he says, team information is not a secret, and the prices will reflect the latest news. There is always the possibility of a significant change to a line up that will affect the price between the time of placing the bet and kick-off, but it's often not possible to wait until the last moment with so many matches kicking off simultaneously.

In the end Kevin Davies did play, and in fact scored, presumably meaning (more by luck than good judgement admittedly) that 1.87 was indeed an excellent price to lay at. If Villa at 1.87 was "an horrific price to lay at", then it's a fair bet that Anonymous was backing at this price confident in his edge. However, when it comes to believing what the papers say, or going by what the market says, I would go with the market every time. If Anonymous thinks that he has an edge based on what's in the news, in my opinion, he is sorely mistaken. By the time any team news is public knowledge, the markets already reflect this. What you read in your morning 'news'paper is not news.

One caveat however is that genuinely fresh news is often received in the market with an initial overreaction. One poster on the Punters Lounge forum said something a while back to the effect that punters are far too easily influenced by minor events, and that people regularly over react.

Overreaction is also noticeable many in-play sports. As I have noted before, one example is in the NFL where a team scoring a touchdown in a close game is almost invariably backed too low. A minute or two later, the conceding team starts its drive, and the price bounces back.

Sur Le Pont

A good start to the weekend with both Accrington Stanley (1.8) and Luton Town (2.13) winning on the Asian Handicaps, a market I have not really looked at much until this season, but which is proving a successful outlet for the ratings.

I'm also finding that in the lower leagues, although liquidity might not be there, as BlueOrange " says, as long as you put up what you think is a fair price and it gets taken up then that's all that matters".

On the Blue Square Premier league he continues "The bets I've placed are found by using my system and picking odds that are not too low and look value. Barrow £30@2.02, Eastbourne £40@1.75. Kidderminster £20@2.52 and York £60@1.57." I checked my ratings and concur that Barrow are favoured by one, and are value.

Laying the favourite in the Bundesliga paid dividends again on Friday with Eintracht Frankfurt losing 0-1 at home at a price of 1.81. More qualifiers Saturday in Stuttgart (1.88), Werder Bremen (1.52) and Wolfsburg (1.6).

There is one Premier League game that is predicted to be a draw, the game at West Bromwich Albion v Birmingham City. I have lays on Stoke City (1.99), Aston Villa (1.87), Everton (1.67), Tottenham Hotspur (1.48), Arsenal (1.71), Manchester United (1.73) and Manchester City (1.8).

The Chelsea v Blackpool game was covered in my previous post, which leaves just Blackburn Rovers v Fulham. Blackburn (2.1) are favoured by 1, in part because of Blackburn's strong home record, and Fulham's poor away record.

Ligue One is unusual this weekend, with just one odds-on home favourite - Lille (1.88). I've also layed the one away odds-on favourite, current champions Marseilles (1.69), away to newly promoted, and currently pointless, local 'rivals' Arles-Avignon, who had a strong home record last season but have lost both their first two home games by 0-1.

Seattle Storm

Women's sports are, for the most part, just not very interesting. From a betting perspective, the only women's sport I have any interest in is the WNBA, although I follow the tennis a little too. The latter's season has come to an end, with Seattle Storm sweeping Atlanta Dream in a best of five series. While liquidity is nothing like it is for the NBA, if you are into trading basketball, the WNBA isn't too bad. It's a rare NBA or WNBA game that sees the favourite ride the 1.01 express to victory.

It's also rare in to have a sports franchise in the USA whose name doesn't end in an 'S'. Just a handful in the traditional sports, but the newer soccer and WNBA leagues don't seem quite so obsessed with names such as Storm, Dream, Shock, Sun, Mercury, Lynx, Liberty, Sky and Fever in the WNBA (67%) and Fire, Crew, Revolution, Union, Galaxy, Dynamo and Impact among current, or future, MLS teams. The MLS is obsessed with names referring to natural phenomena! I found myself diverted to several minutes of fascinating reading on Football Club names at Wikipedia, although I didn't know that Newport County are an English Club.

Nick B mentioned something that I meant to comment on yesterday, but completely forgot about, with regard to the Foxes and Chickens in the Betfair Coop. He wrote:

He forgot to mention the sums of 'punters' money that are taken everyday from the pool by the Betfair bet matching bot. In the old days that's money that would have been re-cycled but in their wisdom Betfair, as with the Premium Charge, didn't things through!

I touched on the subject of cross-matching in June, and certainly the additional penny pinching doesn't help either the Foxes or the Chickens!

For the football later today, the ratings have Accrington Stanley by one over Lincoln City, and Luton Town by the same over AFC Wimbledon.

The weekend predictions include Chelsea by 3 over Blackpool, and are at 2.6 on the Asian Handicap -3.

Foxes In The Chicken Coop

From Greg Wood of The Guardian comes this piece about the ongoing saga of the Betfair flotation.

His analogy of foxes and chickens and the exchanges' possible flaw, made for interesting reading, and his comments on decreasing liquidity in some markets is something I have noticed over the past year or so. If this is indeed true, then where are punters going, or is the conventional wisdom that betting is recession proof not true?

Greg has written on Betfair several times, and I've reported at least five of them in this blog to date. Here's his latest article in full:

Betfair have always been an innovative company but the decision to float the firm may not prove as big a winner as was once envisaged.

The men who founded Betfair are gamblers at heart, and reports over the weekend that they intend to press ahead with a float suggest that their appetite for a punt has not diminished. An oft-quoted estimate of the exchange's value is £1.5bn. These are uncertain times, but if it raises much less than that, it will be seen as a gamble gone astray.

It is entirely possible that Andrew Black and Ed Wray, who own 25% of the business, are so confident about Betfair's long-term prospects that the immediate possibility of a double-dip recession is of little concern. Alternatively, it is conceivable that Betfair, in their opinion, is now as valuable as it is likely to get, and so it is time to cash in without delay.

A little over two years ago, a personal view would have been that the former explanation was much the more plausible. Now, I'm not so sure.

This is not to suggest that Betfair has been anything but an extraordinary success since it was founded 10 years ago, or that there have not been countless punters – this one included – whose love of racing and betting has been reborn thanks to the freedom and flexibility of punting on an exchange. A sense of community too was a powerful bond, in the early years at least. Betfair inspired intense brand loyalty among its users, who then acted as evangelists to recruit more. For years, the benefits and the fun of punting the Betfair way were so overwhelming that no one thought much about the potential drawbacks. The day when doubts started to creep in was 8 September 2008, when the exchange introduced a "premium charge" for consistent winners.

The premium charge was a clear admission that a tiny percentage of Betfair's users were sucking out a grossly disproportionate amount of the money. A flat-rate tax, though, probably just made them suck a little harder, albeit with Betfair trousering some of the proceeds. It did not address the fox-versus-chicken problem that may – repeat, may – come to be seen as exchange betting's major flaw.

Betfair, in this analysis, is a chicken house inhabited by several million birds and a handful of foxes. Some chickens are better than others at avoiding their inevitable fate – some indeed simply offer themselves up for slaughter – but no matter how much you run or hide, Mr Fox will get round to you in the end. Then, one day, there are no more chickens, and the foxes eat each other, or starve.

Some punters simply don't care. Like Foghorn Leghorn after an encounter with a lawnmower, they retrieve their tail-feathers, puff out their chest and return to the unequal struggle. And of course, there will always be a few new chickens that enjoy the warmth and free food, and believe – unwisely – that the house is so big and the foxes so few that their chances are pretty good.

As a result, Betfair will continue to be a major player in the betting market for the foreseeable future, assuming there is no serious competition at any rate. But shareholders demand more than that. Shareholders, particularly in a 10-year-old business, demand year-on-year growth, and it is getting more difficult to see where that will come from. Betfair might crack America, but then again, it might not.

Meanwhile, most punters who play Betfair's UK racing markets on a daily basis will agree that liquidity has flattened out – and perhaps even started to decline - over the last 12 months. Football business is still showing strong growth, but if it follows the apparent pattern of racing, for how much longer?

Betfair remains the most important innovation in betting for the last half-century, and its float could well be a roaring success. But it is no longer quite the no-brainer investment that it appeared in August 2008.

Sevilla And Storm

I mentioned in the last post that the Elo ratings performed surprisingly well in the inter-league games that the Champions League and Europa League throws up. I say 'surprisingly' because I only started tracking the non-British leagues at the start of last season, and the starting values assigned were rather arbitrary, being based on the finishing positions of 2008-09, and on UEFA's coefficient for each league.

Since most games are between teams in the same league, the fact that Italian clubs are rated higher than French for example, is irrelevant, but it's useful when European games are on the schedule.

Of tonight's three matches where both teams are rated, the predictions were Lyon by one v Schalke '04 (W 1-0), Manchester United by two v Rangers (D 0-0) and a draw between Werder Bremen and Tottenham Hotspur (D 2-2), so again they held up very well.

For tomorrow's matches, the ratings predict AC Milan (-1.25) v Auxerre and Bayern Munich (-0.75) v AS Roma, predictions that are not way off when measured by the Asian Handicap prices.

Looking ahead to the Europa League game between Sevilla and Paris St Germain though and it's a different story. The Asian Handicap has Sevilla favoured by less than 1, yet my ratings have Sevilla favoured by 2.5. Sevilla a the third strongest team in Spain, (and 10th overall), whereas I have Paris St Germain at a very average 12th best team in France. PSG are strong at home, but poor on the road, and at 1.68, Sevilla look a value bet.

Another value bet are the Seattle Storm about to play game two of the WNBA Championship. When a team is 20-0 at home for the season, a price of 1.35 seems very generous. Opponents Atlanta Dream were beaten by 18 at home and 10 on the road in the regular season. Game 1 was tighter, but 20-0 says it all.

Mathletics

A great weekend for anyone using the lay system written about last week with 9 winning lays from 13 selections and a first weekend post-commission ROI of 78.28%.

Germany 2 bets, 2 winners, +3.90 points

France 6 bets, 4 winners, +3.17 points

England 5 bets, 3 winners, +3.10 points

Football Elite had a great weekend too with the one Recommended Bet of Lecce winning 1-0 at 3.5. The Short-List selections fared well too, with Nice winning at 3.2, Cesena beating AC Milan at a nifty 7.4, and Brescia beating Palermo at 3.35. They also had Real Zaragoza to beat Malaga, but after spotting Malaga a 5-0 lead, Zaragoza could only pull three goals back. The last team to score 5 (or more) away goals before HT in La Liga was Barcelona who were 6-0 up at Real Sociedad in October 2000. Football Elite's final short-list selection was Hannover who drew with Bayer Leverkusen.

Elo Summary - England: Birmingham's draw with Liverpool was predicted by the Elo ratings, and was a short 3.3. No doubt the previous six matches between these two teams all finishing as draws was a factor! The other predicted draws in the Premier League were Wigan Athletic v Sunderland (3.35) and tonight's Stoke City v Aston Villa match (3.3). Teams expected to win by two were Arsenal and Chelsea. Arsenal added on late to miss the Correct Score, but Chelsea obliged winning 3-1.

Spain: One draw forecast here, but no winner as Athletic Bilbao lost 1-2 to Atletico Madrid. The 2+ goal expected winners were Barcelona and Real Madrid. No one who is into football betting, or who reads this blog, will be unaware that Barcelona started at a very short 1.07 at home to Hercules, and had not lost at home to a promoted club since 2000. It's rare enough that they are down at home at HT, with it being 16 months since they trailed Osasuna by 0-1 and they couldn't save that game either. Hercules won 2-0. Real Madrid won 1-0 v Osasuna.

Italy: No less than five draws predicted here, but just the 3-3 draw at Juventus obliging. A two goal win was expected by Internazionale who won 2-1. AS Roma lost away by 4 goals for the first time in 20 years (since going down 0-5 at Juventus in 1990) and for the first time in 12 years, AC Milan have lost four consecutive away games.

Germany: The league that defies the odds had two predicted draws, but resulted in 2-0 and 2-1 home wins.

France: Three draws predicted, with one winner (3.15) at Brest.

This weeks sees five inter-league matches with the European Champions League Group matches getting underway. There is also one Europa League match where I have ratings for both teams. Last season, the ratings in these inter-league matches performed better than I expected, a trend I hope will continue.

Not such a great weekend for the self-titled Sports Betting Professor, who continues to send me his picks. I may start using them - as lays. He had no less than 10 College Football picks this weekend, and nine lost. That's not easy to do!

How he comes up with so many picks this early in the season is beyond me. In professional sports, off-season turnover is significant enough to warrant caution on the first few games of a new season, but the nature of college sports means that quite often the majority of a previous season's starting line up has graduated or is no longer eligible to play. There is often simply no continuity whatsoever, meaning that early season predictions are based almost entirely on the subjective opinion of a few 'experts'. The Sports Betting Professor appears to be no expert.

I had some time to start reading a new book called "Mathletics" by Wayne L Winston yesterday. Sub-titled "How Gamblers, Managers, and Sports Enthusiasts Use Mathematics in Baseball, Basketball and [American] Football".

The opening chapter covers Baseball's Pythagorean Theorem, something I touched back in April 2009, though not in too much detail. The more runs a baseball team scores, the more games the team should win. Conversely, the fewer runs a team gives up, the more games the team should win. Anyone who read Michael Lewis's excellent "Moneyball" will be familiar with Bill James and sabermetrics who discovered that the percentage of games won by a baseball team can be well approximated by the formula:

Runs scored [squared] / (Runs scored [squared] + runs allowed [squared])

In the final stages of the regular 2010 season, it's a good time to look at the records of teams and see who is currently under-performing as the playoffs near. 

The St Louis Cardinals lead the way, a full 6 wins behind 'where they should be', followed by the Atlanta Braves, Washington Nationals and San Diego Padres who are 4 wins behind schedule.

Over-achievers who might be expected to slip a little in the final few weeks are the Houston Astros (+8), Pittsburgh Pirates (+6) and the Kansas City Royals (+5).

Of these teams in the race for the playoffs, the Atlanta Braves are just one game behind the Philadelphia Phillies, and the San Diego Padres are tied with the San Francisco Giants (and just 1.5 games ahead of the streaking Colorado Rockies). The Cardinals are 6 games back from the Cincinnati Reds, and probably out of it. Interestingly, the Padres play three games at Colorado starting today, followed by four at the St Louis Cardinals. They have 20 games left to play, but this week will have a big say on their playoff chances.

I haven't yet reached Parts II and III on Football and Basketball, but I hope they are as interesting. Unlike baseball, where the playoff schedule means that teams typically use just three starting pitchers as opposed to five in the regular season, and thus regular season performances are a relatively disappointing predictor of playoff prospects, (53.8%), figures from basketball and football should project playoff results more accurately.

Has any similar formula for football ever been proposed? It seems reasonable to think that there should be a correlation between corners, shots, shots on target, and goals, but I've not seen anything serious on the subject.

The NFL is back, although I unfortunately had to miss all the games on Sunday's schedule. A few punts (pun intended) resulted in a small profit, but Week One of the season is not a time to be too bold. Incidentally, the Sports Betting Professor is no better in the NFL it seems, with his three picks for Sunday's game all failing to win, although the Cleveland Browns +3 @ Tampa Bay Buccaneers was a wash.

The New York Jets take on the Baltimore Ravens tonight followed by AFC Champions in waiting San Diego Padres at the Kansas City Chiefs.

My Elo ratings have the Ravens favoured by 1, and getting 2.5 they are available at 1.93.

In the second game, my ratings have the Chargers favoured by 6, and giving 4.5 are 2.02.

The Circle Of Life

The blog will be quiet for the next few days as I shall be attending a funeral, always a reminder of our own mortality, in California. Blogging will not be a top priority.

Do not stand at my grave and weep,
I am not there, I do not sleep.

Germany To Form

Business as usual in Germany where the historically profitable strategy of laying odds-on favourites continued today with lays of Hamburg at 1.41 and Bayern Munich at 1.6 were both landed.

Profitable also in England with Manchester United (1.93), Manchester City (1.38) and Newcastle United (1.6) all failing to win from five selections.

In France the strategy had five selctions, with winning lays of Lyon (1.57), Montpellier (1.93) and Toulouse (1.91).

So 8 winning lays from 12 which is not to be sniffed at.

Spain and Italy are excluded from the system, which meant missing out on AC Milan at 1.57, but dodging losing lays of Valencia (1.52) and Internazionale (1.41).

Germany By Four

I found time to go back a few more seasons in Germany, and they are rather remarkably consistent. I have to admit that when I decided to dig into the numbers, I rather thought that some of my gut instincts might turn out to be wrong in the longer term, but I am encouraged by my first thought which is that laying odds on favourites in Germany is a low-risk profitable strategy.

Bearing in mind that the numbers err on the side of caution, laying odds-on favourites in Germany would have been profitable every season from 2006-07. Some may consider four years not to be enough, but football, and the betting markets, change over the years, and there's a limit to how much data is actually useful. Four seasons seems reasonable, with a total of 1,224 matches reviewed.

Having I'll take a look at the French leagues next, before checking to see how backing the favourites would have played out in serie A and La Liga over previous seasons. If nothing else, it keeps me out of trouble.

So to this weekend, where Internazionale look a very good bet on the Asian Handicap -1/1.5 at 2.03 v Udinese. Last season Udinese were very poor away from home. I have draws at Cagliari, Juventus and Lecce.

In the Bundesliga, strong home teams Borussia Moenchengladbach and Mainz are the picks to cover -0.5 handicaps. Moenchengladbach are 2.19 while Mainz are 2.34

In Spain, Barcelona are just 1.07 v Hercules! Not sure I have seen a league price so short before.

The NFL started yesterday, and my Elo ratings had the New Orleans Saints as 7.63 favourites over the Minnesota Vikings. They won 14-9 for a good start to the season.