The Betfair Prof / Leighton Vaughan Williams / 30 March 2009 / Leave a comment

A cautionary tale from Leighton Vaughan Williams for followers of the Betfair market...

It was available at 18 to 1 at the opening of trading in the morning. The bookmakers and exchanges were more or less agreed about that. It was prominently tipped in the 'Racing Post' and soon shortened. By the time the on-course market opened, however, it was out to 20 to 1 and started at 22 to 1. On Betfair, meanwhile, you could get the equivalent of about 33 to 1 the win and 13 to 2 the place.

Sound attractive? Really depends on the information implied by the drift in the market. On the face of it, it doesn't sound promising. 18 to 1 in the morning, available at as long as 33 to 1 at the off, and little support in the place market either. If a marked shortening of the odds about a horse during the course of the day can be interpreted as evidence that the probability of the horse winning is greater than that implied in the early odds, a marked lengthening would seem to indicate the opposite.

So what do you do if you've already grabbed a piece of the action at 18 to 1, perhaps each-way, when you spot the way the wind is blowing. Lay some of it off at 33 to 1 or so? Doesn't sound particularly appealing, unless you're pretty sure that the drift implies something sinister! Maybe lay off a bit in the place market?

If the market is efficient, and the new odds reflect the true probabilities, the case for laying off any of your original stake is purely a means of hedging your risk. Of course, you might well be led to believe that the horse the layers can't seem to give away is as good as beaten before it leaves the stalls. In this case, laying back some of the stake would be a rational way of reducing your expected loss.

I'm not talking hypothetically here. I'm talking about what happened on Saturday in the William Hill Spring Mile at Doncaster. The Brian Meehan-trained 'Manassas' was the horse in question. Available at 18 to 1 in the morning, the four year-old bay gelding was appearing on a racecourse for just the fifth time. Off the track for no less than 337 days, and something of an unknown quantity, there was no obvious reason to explain why he should have drifted in the market. For that very reason, perhaps, many of the early morning backers could have been forgiven for taking fright and laying back a bit just before the off.

And were they right to do so?

It took this veteran of the Group 1 Jean-Luc Lagardere at Longchamp less than 1 minute 38 seconds to provide the answer. Always travelling well, he hit the front over a furlong out and won like a longshot shouldn't.

Thanks Manassas! You made my weekend.

Professor Leighton Vaughan Williams is the Director of the Political Forecasting Unit and Betting Research Unit of Nottingham Business School, Nottingham Trent University