“The race is not always to the swift, nor the battle to the strong, but that is the way to bet.” Damon Runyon and others
Skilled horse racing bettors know this is not such good advice, as it is better to be patient and look for underlays…and there were two huge underlays to bet on this week.
The wisdom of crowds has been demonstrated time and again, and this is especially true when the people in the crowd are putting their own money on the outcome of an event, such as a horse race, another kind of sporting event, or an election. A huge exception to this phenomenon is BREXIT, or the British referendum on whether to stay in or exit the European Union, in which the nation voted on June 23, 2016 to leave the EU and shocked the world, including the Prime Minister, who resigned.
Betting on BREXIT was the largest market in history for a UK political event. Leading up to the referendum, the British bookmakers took in nearly as much money as they did on the last World’s Cup in soccer.
The public opinion polls showed a nip and tuck race for Remain or Leave the EU, right up to the referendum; the average of the last six polls before the referendum showed Remain in the EU at 51% and Leave the EU at 49%. The very last poll showed Remain prevailing by 52% to 48%, which was almost precisely the margin in the actual vote, but with Leave the EU winning.
Despite the close race depicted in the polls, in the hours before voting began, betting action strongly favored Remain. Remain had been the favorite ever since the referendum was approved in February 2016, but Remain became a prohibitive betting choice in the days just prior to the actual vote. On June 20th, for example, Remain took 95% of the money wagered and bookmakers quoted Remain odds of about 1-to-4. By contrast, Leave odds were approximately 2.75/1. Ladbrokes stated that there was a 27% chance that Great Britain would exit the EU and William Hill had the Leave odds at 28.5%.
On the morning of the referendum, Remain in the EU was at 1/12 odds and Leave the EU was 7/1. At 9 AM, the chances of exiting the EU were 23%. By 11:30 AM, the chances dropped to 17%, a new low.
Besides Leave BREXIT, the other notable underlay example this week was the 2016 NBA Finals, in which the Cleveland Cavaliers defeated the Golden State Warriors in seven games. When the Cleveland Cavaliers were down to the Golden State Warriors three games to one, analytics gave the Cavaliers a three percent chance to win the NBA title. No team in the history of the NBA had won the Finals after being down three games to one. In addition, the Golden State Warriors had the best regular season record in NBA history and rarely lost at home, where the seventh and final game took place. But a team with LeBron James is never to be counted out.
The allure of betting on horse races and sports in general is that one can sometimes cash in by being a contrarian and going against the conventional betting wisdom.
Copyright © 2016 Horse Racing Business
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