Mugs And Shrewdies

Cobo wrote:

Thank you for addressing my doubt in length Cassini.

It's true the markets pre-off are very very accurate and difficult to beat. At least in tennis they are, and they have improved even more these past three years. This is a fact. Or as some people say, a true fact.

Regarding in-play, it's true lots of things can happen that make the price more difficult to assess. That plus fear and greed.

Anyway, if there are opportunities in the Stock Exchange, which has far more people and money trying to profit from it, there is no reason to think betting exchanges should behave differently (except perhaps having more opportunities from that lesser competition).

Of course, having advanced stats of historic in-play game action from a team/player will always help make a better decision.

Cheers!

P.S: And English is NOT my mother language, so please forgive any mistakes ;).

This part is rather casually thrown out there:

“Anyway, if there are opportunities in the Stock Exchange, which has far more people and money trying to profit from it, there is no reason to think betting exchanges should behave differently (except perhaps having more opportunities from less competition)”.

I would argue that while there are indeed opportunities in the trading of stocks, and there are similarities between stock and betting exchanges, there are also significant differences between the two. The biggest is that a stock buys you something tangible – a share in a company’s assets and future earnings – a genuine investment, whereas a bet is more like a traded option that will shortly expire either worthless or in the money.

In my experience, unless you have inside information, you are never going to beat the stock market long-term. The simple truth is that other people with far more money at their disposal will always be ahead of you and the price you can buy at or sell at is always the price that insiders are happy to trade at, i.e. a value price for them, not for you. I've written in this blog many times that you are not going to have an edge by looking at publicly available data.

What allows the common man on the outside to benefit from stocks is the long-term nature of the stock market. Stocks have yields which provide an income, and the stock market inexorably rises as a whole, as the economy grows. The best we can realistically hope for is for our investments to grow broadly in line with the market, which is why you should invest money consistently in index funds and forget about it. Trying to time your entry or exit into / from the market is futile.

Including dividends, but excluding inflation, the stock market's long-term return has been around 9.6%, accounting for inflation it is closer to 6.2%, and after a few years, whether you paid £4.81 or £4.82 for your BP shares isn’t going to be an overwhelming concern. The market for most stocks is so liquid (14 million BP traded yesterday) that the negative edge is always going to be small.

Several studies show that market timers typically get into a market after a period of solid growth, and having missed much of the gains they then exit after the market ‘corrects’ itself and thus miss out on the start of the next bull market. Fund managers love to say how they can beat the averages, but unless they have inside information – look up Raj Rajaratnam, Rajat Gupta, Ivan Boesky or most recently Steven A Cohen – they may get lucky for a year or even a few years, but long-term, they won’t beat the average.

There is no long-term nature for sports investing, and no income from dividends either because your bet has no intrinsic value. To make money from sports trading you need to be entering and exiting the markets at net value prices. You do not have the cushion of dividend income or the expectation that the value will rise in time.

What it boils down to is that you need to be better at assessing the true probability of an event than someone else. One advantage of sports betting on the exchange is that amounts bet are typically much less than the stock market sees on trades, and you can ask for a value price rather than have to take or leave what someone else offers you. Put your bet out there, be patient, and you only need one mug for the bet to go live.

I found this comment on the Betfair Forum in a thread about in-play trading:

Some of us are also making a living trading in-play using Sky Sports pictures. What enables us to profit is being able to price up the events as they are happening.

One of the attractions of betting in-play is that the playing field is more level in terms of information. Pre-off, a few privileged individuals can profit from their inside knowledge. Once the event starts, most, or almost all, of that information becomes public.

This, Feck, is probably a big reason why the pre-off markets are rather dry, especially in your chosen sport, which is more vulnerable than most to the effect of insider trading.

The chosen sport referred to is of course horse racing, but the contributor [Contrarian3] is on the same page as me. One comment on the thread was this:

In Running is where the mugs do their money at a far quicker rate and the shrewdies make theirs.