Monday, 25 August 2008

Value Betting - The Fundamentals

I’ve noticed over the past few weeks, how the term ‘value’ in relation to prices, has been cropping up with increasing frequency in Graeme’s blog posts. As I mentioned in my introduction, I became a ‘value’ disciple many years ago, so it seemed an appropriate subject for me to raise during my week in the chair…

I intend to do a few posts on ‘value’. This is the first of them and the point of it, is simply to set the scene by defining what I view as ‘value’ and what constitutes a ‘value’ bet. In subsequent posts, I will attempt to illustrate how I find value when betting…

I think that to truly get your head around value, you have to accept two things:

Firstly, that any runner can win a particular race. Now I acknowledge that the chances of certain horses winning certain races are slim to the point of being almost non-existent – but the key point is, they are not non-existent… True, on occasions, it may take a freak accident; an act of god or a shocking ride ! – but even all of these things happen (particularly the last one !), and consequently any horse could in theory, win any race it competes in…

Secondly, you must also accept that if you ran the same race over and over again, you would get different winners… Not a different winner every time – but non-the–less, the same horse would not always win the race. If you struggle with this idea, just think of the number of races in which the first 5 or 6 finish within a length of each other. The difference between victory and defeat is likely to be missing the break, not making a move at the right moment; meeting with interference… If the race was re-run, all of these things would change, so a different result is highly likely, when the runners are so closely matched.

If you can accept these two things ie. that no race is completely predictable in advance, then you should be able to buy into the concept of value betting…

Put simply, a value bet is one where the odds you take on a selection are greater than the percentage chance of it wining a particular race. Therefore if you take even money on a horse with a 60% chance of winning a race – you have value: Similarly, if you take 20-1 on a horse with a 10% chance of winning you again have value: even if you take 1000-1 on a horse with a 1% chance, it’s a value bet !

The really tricky bit however, is establishing in advance, what percentage chance a particular horse has of winning a particular race. This is where skill and judgement are required. There are literally hundreds of factors that need to be taken in to consideration when assessing the chances of a horse in a particular race: going; distance; jockey; fitness; draw, pace… the list goes on and on.

The races where the most of these factors are known, are the types of races in which Graeme specialises (ie all age handicaps). These are the races where it is possible in advance, to most accurately predict the likelihood of each of the runner winning. However, whilst assessing such races accurately is not an easy thing to do, Graeme is not the only person to have mastered it. Consequently, horses such as Golden Prospect and Icannshift trade at odds which, to the casual observer, appear far lower than they should be. In truth, there is no value in backing this kind of horse, at the odds generally available, as the market invariably accurately reflects their chances of winning…

4 comments:

Anonymous said...

Yes, the potential reward must be larger than the risk carried. That is value.

And only if you have the ability to recognise value where others do not you have an edge.

And yes you can`t have an edge on a horse that is under the spotlight, because if it`s in the spotlight obviously others have recognised its qualities already and the rewards lower to match the risk.

Unless of course the offered reward shortens way too much... Then say hello to value again, because it`s laying time! :D

markomar said...

Sorry, forgot to sign, up there.

Anonymous said...

Hi Andrew,

Sterling work as guest blogger, I'll be interested to read your opinions on value. I must admit I find the word a bit hackneyed in betting parlance, the way a newspaper tipster will selectively say a bet is great value is mildly vomiting inducing, surely value is a given or are they saying the non-value bets are piss poor? I think where the analysis of value often falls down is the presumption that the beleived edge isn't already priced in, the market isn't infallible but there are shrewd people shaping it and then there's ones who have info that us plebs aren't aware of,

Good luck, Nick

Anonymous said...

good post!

rc

trading tennis blog

http://tradingtennis.blogspot.com