Everything you ever wanted to know about value but were afraid to ask

Betting Strategy / Simon Rowlands / 23 July 2008 / Leave a Comment

The "value" debate is alive and kicking with two of Betting.Betfair's finest crossing swords on the subject. This week, Simon Rowlands...

I was going to add a comment on Jack Houghton's "value, value, value" blog entry, thus boosting his "interactivity quotient", but found that I was quickly running into a good few hundred words and reckoned I would be a fool not to claim them for myself. Especially as there is little else to write about this week. Sorry, Jack.

It was only recently that I discovered the "value" argument is alive and kicking, when I had long since imagined that it had been settled once and for all. The primacy of "value" seems self-evident but apparently some misconceptions about it still abound.

Those who argue against value (and I have crossed swords with a few of them in my time) seem to concentrate on the following points, among others: there is no use in harping on about value if you can't back winners (or lay losers, presumably); if your selection criteria are good enough, value will take care of itself; and too many people hide behind the "value" proposition in order to justify their aversion to going with the obvious and/or to make themselves seem "smart".

To take each of these at a time:

It is, of course, true that if you can't back winners then value is a redundant concept in that particular context. It is also true that if you can't back losers it does not much matter what price your winners are going in at (though it will take you much longer to become a billionaire if those winners are at [1.01] than at [1000.00]). But most of us inhabit a world in which winners and losers come along at least some of the time, and as such the returns from your winners must offset the losses incurred by your losers (and some) in order for you to be profitable. Therefore, the odds obtained about those winners are important. This is essentially the value argument in another guise. If you pick 100 horses that you think should be even money and only 10 of them win, you are either very unlucky or a bad judge of value. Being a bad judge of value does not invalidate value as a concept. And nor does being unlucky.

There is, perhaps, something to be said for leaving considerations of value to those who care about it and are good at it, though not if you want to maximise your punting. The Betfair market is efficient overall. If you back or lay a horse at, say, [2.0] in a mature market you have good reason to believe that the price is close to a "fair" one. You will be, however, very much at the whim and mercy of what others do. The Betfair market is efficient overall but full of flaws in specific instances that clued-up punters aim to exploit. Your methodology may require that you back all [2.0] horses under certain circumstances, but if a significant number of those horses should really be [2.5] then you will be taking under the odds and will lose over time. The fact that your methodology worked previously was because it happened upon value, or got lucky, or both. There is no guarantee that that will remain the case. You should aim to form your views independently of the market while acknowledging the market's overall predictive abilities.

It does appear to be the case that some in the media use the term "value" to justify being speculative and without any apparent understanding of the implications. I have heard "Such-and-Such is each-way value" in a race where backing each-way at all is mathematically stupid. It may also have become an easy get-out for some who want to tip an outsider but who can't make a good case for it. Value can come at any odds - offer me [1.01] about night following day and I would lump on - and the fact that it may have become little more than a buzzword for some who should know better again does not invalidate the concept.

I will now leave it to the estimable Mr Houghton to make more fundamental points about value at greater length.

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I ended a piece I wrote a couple of weeks back with the words "I am not about to recommend that anyone backs such horses [nursery runners carrying 9 - 0 or more that have already won] blindly, but..." and am now rather wishing that I had made such a recommendation!

Whether it was to level stakes or split stakes (i.e. divided when there is more than one qualifier) anyone backing such horses in the last fortnight would have shown a small profit at SP and a much healthier profit at Betfair SP. Among the winners have been Grand Honour, Fault (the only qualifier in his race) and Khor Dubai, who all carried 9-7 or more.

There is, as explained previously, a logical reason why such horses tend to do well in early-season nurseries and why the market may not account for this sufficiently in general. But it is, of course, just one more thing to be considered when trying to determine "value".

There are three nurseries in Britain in the next two days: the 3:50 at Catterick on Wednesday (Rapid Release the sole qualifier); the 6:45 at Leicester on the same day (Common Diva and Burning Flute); and the 6:40 at Kempton on Thursday (Daddy's Gift).

Now, I am not about to recommend that anyone backs such horses blindly, but...