Exotic Betting at the Racetrack

William T Ziemba

• Publisher: WSPC
• Year: 2018
• ISBN:
  9789813278806
• Topic: Economía
• Subtopic: Teoría económica

Exotic Betting at the Racetrack is unique as it covers the efficient-inefficient strategy to price and find profitable racetrack bets, along with handicapping that provides actual bets made by the author on essentially all of the major wagers offered at US racetracks. The book starts with efficiency, accuracy of the win odds, arbitrage, and optimal betting strategies. Examples and actual bets are shown for various wagers including win, place and show, exacta, quinella, double, trifecta, superfecta, Pick 3, 4 and 6 and rainbow pick 5 and 6. There are discussions of major races including the Breeders' Cup, Pegasus, Dubai World Cup and the US Triple Crown from 2012–2018. Dosage analysis is also described and used. An additional feature concerns great horses such as the great mares Rachel Alexandra, Zenyatta, Goldikova, Treve, Beholder and Song Bird. There is a discussion of horse ownership and a tour through arguably the world's top trainer Frederico Tesio and his stables and horses in Italy.

Contents:

• Acknowledgements
• Preface
• Accuracy of the Win Odds
• Arbitrage
• Some Good Bets on Exotics & Place & Show
• Money Management: How to Bet Using Dr Z's Track Money Management System
• Winning Systems: Combining the Crowd's Handicapping with Money Management
• Beating the Place and Show Pools
• Dr Z's Place & Show Racetrack Betting System at the First Breeders' Cup
• Beating the Exacta
• Beating the Quinella
• Beating the Double
• Betting the Trifecta and Superfecta
• The Pick 3 and the Pick 4
• The Pick 5
• The Pick 6
• Primer on Dosage
• The 2012 Triple Crown
• The 2014 Triple Crown
• The 2015 Triple Crown and Other Important Races
• The 2016 Triple Crown and Other Important Races
• The 2017 Triple Crown and Other Important Races
• The 2018 Triple Crown
• The Pegasus World Cup I and II
• The Dubai World Cup
• The Great Mares of 2008–2016
• Three Tries in the Horse Ownership Business
• A Walk into Greatness: Summer 2017 Visits to Tesio's Horse Stables and the Sassicaia Winery
• Bibliography
• Index

Readership: Undergraduate and general readers interested in racetrack betting strategies, and racetrack fans and bettors. Efficient;Inefficient;Racetrack;Betting;Market;Exotic Betting;Race;Handicapping;Strategies00

Chapter 1

Accuracy of the win odds

The crowd is composed of many types of bettors. Most of the people attending a day’s card, particularly on Saturdays and Sundays, do not go to the track all that frequently. They go every so often to enjoy a good day’s racing and to have an entertaining afternoon or evening. They do not expect to win but they certainly would enjoy a winning day and particularly a big exciting payoff. These bettors have many systems for their betting. Many just follow the picks in the program, the daily racing form’s consensus or from one of the tip sheets. Others study the daily racing form with great care and attempt to find overlaid horses going off at odds that are longer than they should be. Others make bets by the way the horses look in the post parade. Some base their choices on favorite numbers like seven in the seventh and names like Lucky Lucky Lucky. Some bet the same amount in every race. Others mix up their bets reserving the larger bets for the horses that look the best.

Most tracks also have a large number of regulars who may number in the thousands. These bettors come to the track two, three, four or more times a week. They might go to more than one track on the same day such as the thoroughbreds in the afternoon and the trotters in the evenings. Most of these regulars are quite serious about their betting. Many keep detailed records of various horses, trainers, jockeys, and track conditions. This can include speed ratings, track variants, post position biases, trainer’s intentions forecasts, trip handicapping and the like. The regulars bet all types of amounts and wagers. Serious amateur handicappers prefer to bet to win. They also like the action in the exotics, particularly the exacta — select the first two finishers in exact order; and the triactor — select the first three horses in exact order. Handicappers tend not to like quinellas — select the first two finishers without regard to the order of finish; the double — the winners of the day’s first two races or any consecutive races; the pick six and pick nine select the winners of six or nine consecutive races; nor place and show betting. Quinellas do not pay enough they reason. Doubles are considered to be a sucker bet because you have to handicap the second race before the first race is even run and the pools for race 2 are basically unknown. The pick six and the pick nine are considered too tough to win. It’s hard enough to pick the winner in one race let alone to pick six or nine in a row. Sure the payoffs are high but the chance of winning is so small that it’s like a lottery and we leave lottery bets to those who want to give away their money, so they say. Also the $2 tickets are expensive so one needs large tickets costing more than $1000 to have a decent chance of winning. Hence Pick 4 with $1 tickets and fewer races is more popular. Place and show bets are not much fun and the payoffs are too small to win anything. They feel that the advice in most handicapping books is good advice: you will have to collect half or more of the time betting to place and more often betting to show just to break even and with the low payoffs the breakage will wipe you out in the long run.

Finally there are the professionals. A top track may have a hundred or more of them. They do all the above and more. Over the years they acquire a deep understanding of horses and the entire racing game. Most professionals are very disciplined. They have to be; after all racing is their profession and possibly their livelihood. Their bets are carefully considered. Bets are not made in every race but only when a situation looks outstanding. Professionals may have bankrolls in the several hundred thousand range and make bets of several thousands or even millions dollars or more on a single situation. Some professionals are skilled in money management techniques, however, most rely on superior handicapping for their success. Many professionals are quite open about their selections and methods; others are quite secretive. A subset of these bet millions in syndicates using large teams of researchers, computers and others with various skills. They bet a lot and can move the odds considerably.

The crowd is thus a conglomerate of many many betting types with varying degrees of knowledge of the horses and the racing game. Some bet very small amounts such as $2 per race. Others bet thousands when a situation looks outstanding. Some use elaborate information, others hardly any. What do we really know about them? The evidence points to several conclusions:

1. It is very very difficult to beat the races; the 15-18% track take plus breakage for straight bets and 17-25% track take plus breakage on exotic bets is extremely difficult to overcome; less than one in a hundred regular bettors is ahead in the long run.

2. The odds set by the crowd, despite the vast differences among the betting styles, are actually very accurate; on average the chance that a given horse will win a race is very close to what the crowd as a consensus thinks it is.

3. The crowd has a considerable bias against favorites and for longshots. The thrill and bragging rights are just not there by wagering on short odds favorites, hence they are shunned and are considerably underbet. Longshots on the otherhand are the crowd pleasers and they are significantly overbet.

The fact that it is difficult to win is no surprise. Many bettors, including a good portion of the expert handicappers and professionals, are aware of conclusions (2) and (3). Some use these facts in their betting but most do not. Let’s look at some actual data to try to nail this down more carefully.

The favorite-longshot bias

The favorite-longshot bias is the tendency in horseracing, sports betting, and financial options for the most likely outcome to be underbet and the less likely outcomes overbet. So people tend to like junk and dislike the best possibilities. This bias has been well known to Irish and other bookmakers who actually create the bias with the bets they offer for the last 100+ years. Figure 1.1 shows the 1949 study by Griffith for 1386 races in 1947 for races at Churchill Downs, Belmont and Hialeah. In this graph, there are the number of entries, winners and winners times odds for every odds group. The axes show the odds, the subjective probabilities, versus the actual number of inners, the objective probabilities.

Figure 1.1: Griffith’s 1949 study on the favorite-longshot bias; see Hausch, Lo and Ziemba (2008) for the reprinted paper.

Figure 1.2 and Table 1.5 show these conclusions. They are based on 35,285 races at many different tracks during 1947-75 as summarized in Snyder (1978).

Figure 1.2: Expected Return Per Dollar Bet for Different Odds Levels, in 35,285 Races Run During 1947-1975. Source: Snyder (1978).

Table 1.1: Summary of the Six Studies Comparing the Rate of Return on Win Bets at Various Odds Levels; Source Snyder (1978).

The favorite-longshot bias shows up very clearly in these large data sets. The longer the odds are, the lower the average return is. Referring to Figure 1.5 we see that at odds up to about 9-2, the expected return per dollar bet is higher than the track payback less breakage. After that point the return decreases as the odds increase. Also, as the odds become shorter the average return increases. At very short odds one even had slight profits. So let’s look at extreme favorites.

Betting to win usually leads to losses unless you have an edge

Hardly a man that’s now alive paid a mortgage at 3-5 Harvey Pack

Historically, betting to win usually leads to losses except on extreme favorites, but, as we see below, all bets for win, currently in 2016, on average produce losses.

On average, bets to win lose the track take and breakage. For each dollar wagered the bettors on average receive about 81-84 cents. With an 84% return you have to pick winners about 19% more often than the average bettor to be even. With an 81% return it’s even worse — you must be about 23.5% better than the average bettor just to break even. Except for the tail biases, the average bettor is not bad at all at picking winners. In fact, the crowd is very good at picking winners as they establish win odds that very accurately represent on average the true chances of horses winning at various odds levels, except for the tail biases. The crowd loves longshots and shuns favorites. So unless you a...