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Cracking the Horse Racing Code

In chapter 22, we learned that people who bet on horse racing should bet fractions of their wealth on horses based off of the probability that the horse is given to win, the house odds. This appears to be a good strategy but practically speaking we see that other strategies may be better. For instance, this strategy is based on how the house determines their betting lines and bookings, using their information. However, what if we wanted to outsmart the house and is this even possible? Matthew Donato in his article for bleacher report attempts to do this by developing a very simple algorithm based off of a few key variables.

Before delving into the creation and effectiveness of this method we must first understand how typical horse racing bets are placed. So, the house determines the odds a horse has of winning a race and writes this down as some form of number ratio, 3 to 1, 5 to 2, etc. This means that if the odds are 3 to 1, a bet of 1 dollar will result in earning of 3 dollars. However, these odds can also be viewed of as a percentage by adding 1 and then dividing 100 by that number. For example, 3 to 1 odds result in a 25% chance of winning. If you convert all of the horses betting odds to percentages and add them up it will result in a value greater than 100%, this is to ensure that the house makes a profit.

Now, Donato’s method requires finding a percentage value for a horses probability of winning based off of one’s own variables and research, not the house betting odds. The 3 variables he used were “money earned per race in the current year”,  “average speed rating over the last four races”, and “lifetime win percentage”. He uses past performances to determine the horse ranking and then gives them each a value based off of the rankings similar to that of the Borda Count. After the horses’ total points are determined from the 3 variables, he takes those as a percentage of the total points and compares it to the house betting odds to determine his picks.

His method places his own information against the houses information, a similar struggle to that of following a crowd or making a singular decision. Now we don’t know how effective this technique is but if for some reason the variables he has chosen are more correlated to results than the variables the bookmakers are using, he will be winning money. This betting logic could be applied to any other sport, resulting in an increased desire for information and research related to these sports so that people can determine their own betting valuations. The trend of this occurring has already begun years ago as companies provide enhanced statistics at premium prices. Some companies like Rotoworld use their own algorithms to give consumers an optimized betting scheme. The implications of such a strategy being successful results in the elimination of gut feelings and emotions in the betting world and people will solely bet solely based on numbers and specific key variables they deem important.

http://bleacherreport.com/articles/27781-cracking-the-horse-racing-code

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