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Forecasting horse race outcomes: New evidence on odds bias in UK betting markets

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  • Smith, Michael A.
  • Vaughan Williams, Leighton

Abstract

Using bookmaker odds data derived from ten seasons of Flat Racing in the UK, we confirm the existence of a favourite-longshot bias; i.e., the expected return to level stake bets placed at shorter odds exceeds that to level stake bets placed at longer odds. We find, however, that the degree of bias declines significantly over the period studied, with a lower bias being evident in the five years after 2000 than in the five preceding seasons. These findings have important implications for methods of forecasting race outcomes that include odds as an endogenous variable. In particular, we conclude that the parameters of the bias need to be re-estimated through time in order to generate the most efficient forecasts based on the prevailing odds distributions.

Suggested Citation

  • Smith, Michael A. & Vaughan Williams, Leighton, 2010. "Forecasting horse race outcomes: New evidence on odds bias in UK betting markets," International Journal of Forecasting, Elsevier, vol. 26(3), pages 543-550, July.
    • Handle: RePEc:eee:intfor:v:26:y::i:3:p:543-550
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    References listed on IDEAS

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    2. Fildes, Robert, 2015. "Forecasters and rationality—A comment on Fritsche et al., Forecasting the Brazilian Real and Mexican Peso: Asymmetric loss, forecast rationality and forecaster herding," International Journal of Forecasting, Elsevier, vol. 31(1), pages 140-143.
    3. Dave Cliff, 2021. "BBE: Simulating the Microstructural Dynamics of an In-Play Betting Exchange via Agent-Based Modelling," Papers 2105.08310, arXiv.org.
    4. Sperb, Luis Felipe Costa & Sung, Ming-Chien & Johnson, Johnnie E.V. & Ma, Tiejun, 2019. "Keeping a weather eye on prediction markets: The influence of environmental conditions on forecasting accuracy," International Journal of Forecasting, Elsevier, vol. 35(1), pages 321-335.

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