Value and Horses

People often talk about there being, or not being, as the case may be, ‘value’ in a given horse in a given race at given odds. But what do they mean when they use the term ‘value’?

I’m not sure, is the short answer and I’m not sure that anyone that I have conversed with about the subject does either, judging by the responses that I have received. No one that I have ever discussed the term with has ever been able to give me a satisfactory answer.

Why is this?

My feeling is that it is because it depends on one’s perception. People have different perceptions and therefore one person’s perception of whether or not a horse at given odds has value will differ to those of another person.

Let’s take the case of that well-known horse Denman. Denman, by the way, started his last race at odds of 1/3 and won easily. If Denman was facing mediocre opposition in his next race and his odds were 100/1, we would all agree, I hope, that there would be value in Denman at these odds. Even at 10/1, most people would agree that there was value in the horse. When we get to odds of evens, some people might feel that there was no value left but there would be people who would back it to win at these odd and would feel that there was value in the horse, even at these odds. Well, what about odds of 1/2? Even more people would feel that there was no value left but there would still be people who would back it to win and would feel that there was value in the horse, even at these odds. Let’s go further. Suppose Denman’s odds were 1/3. Now what? Does Denman still have value? At what odds do we draw the line and say, at lesser odds, Denman has no value, and, at greater odds, he does.

Now do you see what I mean about perception and how one person’s perception differs from that of another? The problem is that there isn’t a mathematical formula that we can use to calculate ‘value’. Even if there were, some people would agree with it and some wouldn’t. That’s why, in my opinion, value is about perception and one person’s perception differ’s from that of another. Therefore, at given odds, some people will perceive that a horse has value and others will perceive that the horse has no value.

So, where is this going?

Well, let’s move on and see.

I decided, a long time ago, that trying to determine whether a horse has value or not was a futile act. I therefore looked at the bigger picture.

Those who follow horse racing look at odds on a frequent basis. Before we carry on, let’s state exactly what we understand by odds. Let’s take odds of 10/1, for example. It means that a horse, whose odds are 10/1, will, on average, win one race in 11. This is because the first figure (10) represent the chances of it losing and the second figure (1) represent the chances of it winning. Therefore, in total, there are 11 chances, only 1 of which is a winning one. The rest are losing ones.

If we take horses whose odds are low i.e. less than 10/1, their success rate is, by and large, in line with their odds. So for example, a horse whose odds are 6/1 wins approximately one in seven of its races.

But is this true for all odds?

Let’s take another example. Let’s take horses whose odds are 100/1.

Today, 1st. November 2006, there were 35 races at Chepstow (7), Huntingdon (7), Kempton (6), Nottingham (7) and Punchestown (8). 28 of the horses in the 35 races started at odds of exactly 100/1. Therefore, on average, there were 0.8 horses per race whose odds were exactly 100/1.

Now, let’s take this a little further. Let’s suppose that all races, on average, contain 0.8 horses whose odds are exactly 100/1 and that there are, on average, 3 meetings per day, and that there are, on average, 7 races per meeting. Therefore, on an average day, there are 16.8 (0.8 x 7 x 3) horses running whose odds are exactly 100/1. Assuming that racing takes place 7 days per week, there are, on average, 117.6 (7 x 16.8) horses running per week whose odds are exactly 100/1. Now, a horse whose odds are 100/1 should win once in 101 races. Therefore, given that, on average, there are 117.6 horses running per week whose odds are 100/1, at least one of those horses should win. Yet, can you remember when the last 100/1 shot won a race? No? Neither can I. Ok, the odd one may make the frame now and then, but win? When one does, it makes the headlines in the sports pages, such is its rarity.

What this shows is that, at high odds, horses win far, far less often than their odds suggest. This means that there is considerable value in long-priced horses for those who lay horses. The value derives from the difference between the actual win frequency and the theoretical win frequency (odds). For me, this is what ‘value’ is really all about – the difference between the theoretical and the actual win frequency. The greater the difference, the greater the value. Where there is no difference, there is no value.

Why is value important? It is important because ‘value’ can be exploited and used to provide a profit. In the case of long-priced horses, profit can be made by laying them.

So why is it that, generally, people don’t lay long-priced horses and why is that lay tipsters generally select short-priced horses?

The answer to these questions, in my opinion, is Betfair.

Betfair has, in my opinion, changed the betting landscape for the better since virtually anyone can now become a bookie. Prior to the advent of Betfair, one required a considerable amount of money in order to become a bookie.

On the other hand, Betfair has, unwittingly, created an issue. If one compares the Betfair odds with the odds at track-side, the difference is negligible provided the odds are small (< 6/1). As the odds increase, however, the difference between the Betfair odds and the track-side odds also increases. At high odds, the Betfair odds may be up to 8 times the track-side odds.

The point at which the Betfair odds and track-side begin to diverge is taken by numerous layers to be the point at which a horse ceases to have value for laying purposes. The statistics, however, indicate otherwise and show that there is more value in laying the higher odds horses. In fact, the greater the odds, the greater is the value. This is in spite of the fact that Betfair odds are considerably higher than track-side odds. You don’t believe me? Have a look on the web and see just how few successful and consistent low-odds laying systems there are.