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Strange...But True

Wednesday, January 08, 2003

By Dan Gigler, Post-Gazette Sports Writer

Hey palooka ... you lookin' for a little action on this weekends
playoff games? Gotta love the over (44 at last check) in the
Steelers/Titans game, right? How 'bout Atlanta? Seven point dogs, with
Michael Vick at the helm? Well, before you lay the juice and lose the
house payment on a parlay, check this out ...

According to an article by Ira Carnahan on Forbes.com, a growing body of academic
research suggests that while the sports betting market, like the stock
market, is mostly efficient, the psychological biases of bettors create
some anomalies -- and openings for profit.

Justin Wolfers worked in the Australian bookmaking industry before
getting his Harvard Ph.D. and now teaches "Finance, Behavioral Economics
and Sports Betting" at Stanford's business school. He warns it's tough to
come out ahead, both because professional gamblers often act as
arbitrageurs, thus reducing anomalies, and because transaction costs are
so high. Here are some tips from the research of the gambling dons.

1. Bet
against suckers
When you wager on a game, you're
not betting against your bookie, who usually strives to maintain a line
that will draw an even balance of bets, but against fellow bettors. If
more bettors favor the Steelers, the bookie moves the line, requiring the
Steelers to win by a bigger and bigger margin (even an improbable one)
until enough bettors take the other side.

Where can you find suckers to bet against? Hugely popular events like
the upcoming Super Bowl, where an estimated 90% of bettors are
unsophisticated, offer one opening. Even in regular-season play, the
betting on NFL games is generally considered less sophisticated than
betting on baseball, which has a large group of numbers-obsessed fans.

The office is another good place to bet, provided you won't get fired
for it. The Wharton School's Andrew Metrick found bettors in NCAA
basketball tournament pools put too much on first seeds and local teams
and too little on second and third seeds and out-of-towners.

2.
Keep costs low
Nevada bookmakers last year
kept only 4.5% of the pool in football, 5.5% in basketball and 3% in
baseball. Betting on these sports is generally legal only in Nevada. While
illegal bookies obviously don't report their holds, they appear to work on
roughly similar percentages.

3. Take
the long view
NFL bettors tend to overreact to
teams' recent performances while ignoring their longer-term records, a
1997 study in the Journal of Finance found. So there's a profit
opportunity for bettors willing to take a chance on teams that have
struggled recently. Bettors also tend to overestimate the significance of
games with lopsided scores and those with an unusual number of fumbles,
interceptions or penalties. While turnovers and penalties are important --
they explain about 40 percent of the point difference between teams --
they reveal less than bettors believe about a team's prospects in future
games.

4. Bet
against the home team
A new study finds that
local illegal bookies offer odds nearly identical to the legal odds in Las
Vegas with two exceptions. First, local bookies often offer worse odds on
the home team, reflecting the bias of local bettors. Some local bookies
also use their knowledge of bettors' past wagers to price discriminate: If
your bookie knows you would never bet against a certain team, he might
feed you a sucker bet. One way to avoid such problems is to bet over the
Internet. This is illegal or at least questionable, depending on where you
live. But if you choose to do it anyway, Wolfers suggests checking out
http://www.sportsbook.com/, http://www.willhill.com/, http://www.centrebet.com/ and http://www.betfair.com/.

Watch your kneecaps ... [email-masked].

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