Profiting from overreactions
In financial markets, studies have been done on the "winner's curse" and the "loser's blessing" - the basic premise being that individuals, when revising their beliefs, tend to overweight fresh information and underweight prior data.
The same thing happens in in-play betting markets too, where price movements overreact to events that are taking place. Yesterday's play in the Ashes test provides a classic example.
England have been set 550+ to win. While Australia are not 100% certainties to win (there is no such thing in sport), most (sane) people would conclude that Australia are overwhelming favourites and should be offering no more than, say, 1.05 to win the game.
I didn't see what the odds were when England set off on this run chase - some would say wild goose chase - with three tests going on and play overlapping, trying to keep track of more than one game at a time does this old head in; but as Cook and Bell developed a partnership I switched over and saw Australian odds for winning had blown out to 1.16.
I took a chunk at 1.20; made a mental note to take more at 1.40 but unfortunately Bell went out and the Aussie odds were "only" 1.33. Another quick wicket before another large partnership - this time the odds on Oz reached 1.42 - I was waiting for 1.50 :-( - when Cook fell just before the close of play.
With England at 265/5 - basically halfway with half the wickets lost, overnight odds are Aus 1.15 Eng 25.0 Draw 10.5 - partly influenced by a weather forecast of thundery showers in the morning; but in my mind Australia should still be around 1.05, even with the forecast. In fact, they should not have moved much from 1.05 throughout the whole of yesterday's play and where the "winner's curse" and "loser's blessing" provides avenues of opportunity for scratching out a bit more profit from a dead game with (barring miracles) a predictable result.
The same thing is happening in the NZ - Sri Lanka game. NZ have 500-odd to get to win the game, Sri Lanka have two days to get 8 more wickets and the forecast is not too bad - I don't think the rain is going to hit Wellington, certainly not today and probably not tomorrow either.
As I type this post, the odds on Sri Lanka have drifted from 1.12 at the start of play to 1.22 after half an hour with no wickets and 30 runs. I don't know if NZ have ever scored 500 in their second innings - certainly not in recent times and they don't get 500 that often in the first innings. Yet someone at the moment is wanting to back NZ at 8/1 to win the game - God bless 'em.
With NZ at 110/2, are they any more likely to win the game than they were when they were 0/0? Not that much in my book, and I'd only give them half a chance if they reach, say, 350/3. Yet the market has already assessed them as twice as likely to win the game thanks to a reasonable, but nothing out of the ordinary, start.
Overreactions - long may they continue.
The same thing happens in in-play betting markets too, where price movements overreact to events that are taking place. Yesterday's play in the Ashes test provides a classic example.
England have been set 550+ to win. While Australia are not 100% certainties to win (there is no such thing in sport), most (sane) people would conclude that Australia are overwhelming favourites and should be offering no more than, say, 1.05 to win the game.
I didn't see what the odds were when England set off on this run chase - some would say wild goose chase - with three tests going on and play overlapping, trying to keep track of more than one game at a time does this old head in; but as Cook and Bell developed a partnership I switched over and saw Australian odds for winning had blown out to 1.16.
I took a chunk at 1.20; made a mental note to take more at 1.40 but unfortunately Bell went out and the Aussie odds were "only" 1.33. Another quick wicket before another large partnership - this time the odds on Oz reached 1.42 - I was waiting for 1.50 :-( - when Cook fell just before the close of play.
With England at 265/5 - basically halfway with half the wickets lost, overnight odds are Aus 1.15 Eng 25.0 Draw 10.5 - partly influenced by a weather forecast of thundery showers in the morning; but in my mind Australia should still be around 1.05, even with the forecast. In fact, they should not have moved much from 1.05 throughout the whole of yesterday's play and where the "winner's curse" and "loser's blessing" provides avenues of opportunity for scratching out a bit more profit from a dead game with (barring miracles) a predictable result.
The same thing is happening in the NZ - Sri Lanka game. NZ have 500-odd to get to win the game, Sri Lanka have two days to get 8 more wickets and the forecast is not too bad - I don't think the rain is going to hit Wellington, certainly not today and probably not tomorrow either.
As I type this post, the odds on Sri Lanka have drifted from 1.12 at the start of play to 1.22 after half an hour with no wickets and 30 runs. I don't know if NZ have ever scored 500 in their second innings - certainly not in recent times and they don't get 500 that often in the first innings. Yet someone at the moment is wanting to back NZ at 8/1 to win the game - God bless 'em.
With NZ at 110/2, are they any more likely to win the game than they were when they were 0/0? Not that much in my book, and I'd only give them half a chance if they reach, say, 350/3. Yet the market has already assessed them as twice as likely to win the game thanks to a reasonable, but nothing out of the ordinary, start.
Overreactions - long may they continue.
Labels: cricket
posted by Rob Crawford at 10:10 AM
0 Comments:
Post a Comment
<< Home