Crowded Out

Alpha Dog

With uncanny and spooky timing, no sooner had I mentioned Peter Nordsted and his success with backing baseball 'dogs, than he starts blogging with an opening post on the very same subject, complete with a mention of the amazing blog that changed his life - or at least the way he "approaches betting, especially on the US sports".

The amazing blog can be found here, and Peter's Trade On Sports blog has been added to the blog roll. Peter highlighted the following quote from this post of mine from 2009 (in case you are wondering, the joke at the time was about Adam Heathcote's 'Exchange Secrets' tipping service - whatever happened to that?):

In sports such as baseball, historical data shows that picking underdogs is the best way to "keep the wind" at your sports investing back. This may result in winning only 40%-45% of your selections, but the long odds means you'll have a positive return.

Underdog

Picking underdogs, or laying favourites. Long-time readers will be familiar with the Bundeslayga system, (laying odds-on selections in the Bundesliga), and will have been rewarded to the tune of 17.88 points from 177 selections. Laying the Away shorties (the Bundeslayawayga selections) performed very well, with just 35 selections but returning 9.73 points profit with a longest losing sequence of just four and a 45.7% strike rate. 

As I have written before, there are a number of reasons why people like to back favourites, and why a contrarian approach can reap rewards - why do people follow the crowd? From the world of stocks:

Comfort - It is comforting to see other people doing the same thing we’re doing. When you’re lost and trying to find your way, it is comforting to see other people in the same location even though they are lost too. At least you’re all lost together.

Fear - It is scary to be alone. It’s hard to believe that everyone else, except us, could be wrong. Maybe we’re the one that is wrong. We caution pioneers – “they are the one’s with arrows in their backs.”

Risk Aversion - When you go against the crowd, you accept full responsibility for the results. It used to be said that nobody was ever fired for selecting IBM. When you invest with the crowd or invest in an index fund it is a safe way to avoid criticism.

BigAl posted a comment on my post about useful and interesting data, writing:

I think you're probably underestimating the skills of the very best sports gamblers / modelers.

This sort of data would be invaluable to them. Obviously not all of it, but they'd love the chance to find out.

In terms of in-running, you're right, probably not that useful in the current markets. But mainly for liquidity reasons.

I doubt that even the very best of sports gamblers / modelers can make use of the statistics I was referring to, such as the distance a player runs during a game or his top speed, but I am well aware that other data is very useful. I think that most data that is of use to gamblers is readily available, or in the case of PPP (Points Per Possession), easily calculable - it is the data that is of most use to coaches that is proprietary.

As for liquidity, basketball liquidity in most NBA games is fine, especially at this time of the season, but baseball and ice-hockey (even with the Stanley Cup play-offs in full flow) are very poor. BigAl added:

A guy called Haralabos Voulgaris is an interesting character in the NBA betting world.

http://articles.businessinsider.com/2011-04-28/sports/30044313_1_gambling-bug-haralobos-voulgaris-basketball-expertise

and this was a link to a great read - thank you. Here's just one quote from Mr. V, something of a gem in my opinion - read and learn:

“In life, I find that people have a really tough time being honest with themselves, and saying ‘boy was I ever wrong about that.’ But when you are losing money, reality tends to set in. I have had a lot of really well-thought-out theories or methods that simply weren’t profitable, and it is my opinion that those theories were just flat-out wrong.”