![]() If we then find that all bets with an expected profit of +3.5% (or loss of -4.4%) collectively return a profit of 3.5% (or loss of 4.4%), we would conclude that our hypothesis is correct, that is to say Pinnacle’s odds, on average, are efficient, accurate or wise. ![]() On the other hand, betting at the market low of 2.15 would entail an expected return of 0.956 or loss of -4.4% (2.15/2.25). Consequently, if our hypothesis is correct, the best market price of 2.33 would offer an expected return of about 1.035 or profit of +3.5% (2.33/2.25). ![]() One way we could test relative price efficiency of Pinnacle versus other bookmakers is to formulate the following hypothesis and accompanying test:ġ) Assume Pinnacle’s odds (with their margin removed) provide an exact measure of the true outcome probabilities.Ģ) Consequently, the ratio of another bookmaker’s odds to Pinnacle’s odds provides a measure of expected value or expected return.ģ) Analyse actual returns across a range of expected values.įor example, with the margin removed, Pinnacle’s estimated fair price for Liverpool to beat Tottenham was about 2.25, implying roughly a 44% outcome probability. How do we know which price was more accurate? Testing Pinnacle’s wisdom against other bookmakers This varied between 2.15 and 2.33 with other bookmakers. For example, Pinnacle offered a price of 2.22 for Liverpool to beat Tottenham in their game played 11 th February 2017. Of course, not all bookmakers offer the same price for a team. Whilst such an observation is not conclusive proof of market efficiency, it is consistent with it. ![]() Teams priced at 4.00 win 25% of the time, and so on. once Pinnacle’s margin has been removed) typically win about 50% of the time. The greater the number of independently acting players expressing a range of diverse views about a sporting event there are, the more likely it is that a crowd will be wise and the betting odds accurate.įor example, teams fairly priced at 2.00 (i.e. This analysis demonstrated that Pinnacle’s betting odds, on average, are highly efficient - that is to say, accurate. I have previously examined just how accurate Pinnacle’s 1X2 soccer match betting odds are, and by extension how wise their market is, by means of comparing expected outcome probabilities (defined by the odds) to actual outcome percentages. The greater the number of independently acting players expressing a range of diverse views about a sporting event there are, the more likely it is that a crowd will be wise and the betting odds accurate. However, typically we find that the more liquid (or popular) the betting market, the better the collective wisdom. It is true that herds are prone to expressing systematic biased judgement when faced with uncertainty, leading to a collectively less wise opinion. However, it is the flow of money via which the opinions of bettors are expressed that is used by bookmakers to judge the respective outcome probabilities, by means of the odds. Of course, sporting outcomes are binary by nature: they either happen or they don’t. the results of sporting events cannot be known a priori, yet even under these conditions the crowd does generally provide an accurate assessment of the respective probabilities of the outcomes. By the end of the test, the average guess was just 1.4% higher than the actual figure, despite only 1 person out of the 608 entries guessing correctly. In 2014 Pinnacle tested the Wisdom of the Crowd hypothesis by inviting people to guess the number of chocolate balls in a video.
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