Place Vs. Fave/Long Exacta Running Tab

[Antitrust32]

Originally Posted by blackthroatedwind

This is an absurd mentality. What does " if " mean? If some of those ridiculous big priced horses at Gulfstream hadn't won, or had run second to the favorite, the exacta would have been substantially higher. " IF " is absurd to use.

I agree that I thought the exacta pool would win by much more, and Gulfstream was pretty much out of the ordinary for awhile there. It will be interesting to see what the next 250 results are.

Just pointing out how close of a race it was and evaluating the final strides...

[blackthroatedwind]

There is no need to wait for future results. You can just as easily use past results.

The reason the exacta is better is for a variety of reasons. One, the breakage hurts the place payoffs enough to raise the takeout to at least a couple points higher than the 15 or 16%. Another is that favorites are overbet in place pools for the most part and as they finish first or second around 50% of the time they will artificially deflate place payoffs on the other horse. But, the biggest reason is that with exactas you are effectively making a parlay of two different results, one horse to win and another to place, with a takout of roughly 20%. It's not wholly dissimilar to making a football parlay on the point spread AND the over/under while only paying the vig for one bet. So, even though the exacta takout is, say, 20% vs. 15% for place, you are effectively ( though not exactly ) lowering it to 10% on each outcome. Now, when you add on the actual increase that breakage brings to the place takeout you have a substantially better mathematical proposition.

The truth of this contest is that an aberational result which caused place bets to appear the better bet would have sent a TERRIBLE message to people. This idea that place betting is a sound strategy is flat out wrong and yet another reason people have trouble making money betting horses. The idea is to find ways to maximize one's profits or returns. Place and show betting, simply put, minimizes returns. Place and show bettors are suckers and losers at the windows.

[SniperSB23]

Originally Posted by blackthroatedwind

The truth of this contest is that an aberational result which caused place bets to appear the better bet would have sent a TERRIBLE message to people. This idea that place betting is a sound strategy is flat out wrong and yet another reason people have trouble making money betting horses. The idea is to find ways to maximize one's profits or returns. Place and show betting, simply put, minimizes returns. Place and show bettors are suckers and losers at the windows.

You are of course evaluating this on the basis of someone looking to make money through wagering as opposed to people wagering as a hobby. For people wagering as a hobby I don't think they are going to be happy to know that statistically they made the right play when they bet an 80-1 shot under the favorite in the exacta and it winds up second behind another horse and they get nothing. It is actually more Game Theory than anything. Some people are risk seekers and want the best longterm payout and are willing to come up with nothing on several occassions when they are right on a long shot. Others are risk averse and want the utility (or happiness) of getting a payoff every time. That happiness of winning every time you are right is worth more to them than the difference in both methods for the longterm.

This is why it drove me nuts majoring in statistics and economics. They contradicted each other in so many ways. I could give a 100% statistically correct answer to a question on an economics exam and get zero points for it.

[Dunbar]

Originally Posted by blackthroatedwind

There is no need to wait for future results. You can just as easily use past results.

Are you volunteering? ;>) I'd be interested in past results, as long as the begin and end points are clearly stated before whoever does the looking starts checking.

Originally Posted by blackthroatedwind

The reason the exacta is better is for a variety of reasons. One, the breakage hurts the place payoffs enough to raise the takeout to at least a couple points higher than the 15 or 16%.

No, it doesn't. The average place payoff was about $15. The average breakage on a $2 bet is 10 cents except in NY where it is 5c. 10 cents out of $15 is 0.67%. 5 cents out of $15 is 0.33% So the takeout climbs to 16.67% in Kentucky and 15.33% at AQ. Those increases hardly made a dent in the gap with the exacta takeout. (Besides, with an average exacta payoff of $51, the exacta takeout climbed 0.20% in Kentucky and 0.10% in NY due to breakage). In short, breakage has negligible effect on the contest.

Originally Posted by blackthroatedwind

Another is that favorites are overbet in place pools for the most part and as they finish first or second around 50% of the time they will artificially deflate place payoffs on the other horse.

That's an interesting idea, but I'd like to see some data. It should be very easy to substantiate that. If it's true, then place bets placed on favorites should lose at more than the track take. (I can't think of any other definition of "overbet" that would apply here.)

Originally Posted by blackthroatedwind

But, the biggest reason is that with exactas you are effectively making a parlay of two different results, one horse to win and another to place, with a takout of roughly 20%. It's not wholly dissimilar to making a football parlay on the point spread AND the over/under while only paying the vig for one bet. So, even though the exacta takout is, say, 20% vs. 15% for place, you are effectively ( though not exactly ) lowering it to 10% on each outcome. Now, when you add on the actual increase that breakage brings to the place takeout you have a substantially better mathematical proposition.

This may be correct, and it's what I thought you were getting at when you said there was a "mathematical" reason earlier. Maybe it should be obvious to me, but it isn't yet. I plan to keep gathering data for another 250 bets, but at the same time I'm working on the math of a simple example that I hope will demonstrate which is better.

Originally Posted by blackthroatedwind

The truth of this contest is that an aberational result which caused place bets to appear the better bet would have sent a TERRIBLE message to people. This idea that place betting is a sound strategy is flat out wrong and yet another reason people have trouble making money betting horses. The idea is to find ways to maximize one's profits or returns. Place and show betting, simply put, minimizes returns. Place and show bettors are suckers and losers at the windows.

I think that's excellent general advice. However, I don't think it excludes the conclusion that place bets on > 10-1 horses are a better bet than betting the same horses in exactas using the race fav in the 1st position of the exacta.

--Dunbar

[blackthroatedwind]

NY does not break to ten cents above $10 I don't believe.

I'm too weary of this to argue anything else. I may spend a few hours up at DRF going through past data....if not this week then soon.

[SniperSB23]

Honestly I don't think you can say that one is right or wrong all the time. Perhaps on average the best play is the favorite over your horse in the exacta but really the best play is to examine the percentage of your horse and the favorite in the place pool and project a payout and then examine what the exacta probable pays. I think there are plenty of cases where these pools would tell you that for that particular race betting place is a better play.

[Dunbar]

Originally Posted by blackthroatedwind

NY does not break to ten cents above $10 I don't believe.

I'm too weary of this to argue anything else. I may spend a few hours up at DRF going through past data....if not this week then soon.

Interesting about NY. Didn't realize that.

If you do get into the past data, I'll be very interested in how it comes out.

Also...

Originally Posted by Dunbar

The average place payoff was about $15. The average breakage on a $2 bet is 10 cents except in NY where it is 5c. 10 cents out of $15 is 0.67%. 5 cents out of $15 is 0.33% So the takeout climbs to 16.67% in Kentucky and 15.33% at AQ.

I should have written "the average loss to breakage...", not "the average breakage...". But the percentages are correct, except that the NY cost should be the same as the KY/CA tracks for place payoffs above $10.

--Dunbar

[Dunbar]

Originally Posted by blackthroatedwind

Another is that favorites are overbet in place pools for the most part and as they finish first or second around 50% of the time they will artificially deflate place payoffs on the other horse.

Originally Posted by Dunbar

That's an interesting idea, but I'd like to see some data. It should be very easy to substantiate that. If it's true, then place bets placed on favorites should lose at more than the track take. (I can't think of any other definition of "overbet" that would apply here.)

I'm re-thinking the highlighted part of what I wrote. It turns out to NOT be easy to substantiate it.

For a 15% track takeout, the average return for a $2 place bet should be 1.70. When btwind says that favorites are overbet in the place pool, I think that means that $2 bet on all favorites must return an average of less than 1.70.

Let's say we look at 500 favorites and take the average payout of a $2 place bet on each one, including using $0 payout for the losers. If our average comes out to be $1.64, which would suggest that place bets on favs lose at 18%, is that difference from $1.70 statistically meaningful? I don't think so. I estimate the standard error of the mean* on those 500 bets would be 0.14. That's more than twice as large the 0.06 difference between $1.70 and $1.64. That, in turn, means there there is a very good chance that the "real value" for place bets on favs is $1.70, even though our 500-bet average is $1.64. In other words, the difference of 0.06 would be statistically meaningless.

To get the standard error down to 0.03, you'd need to look at the place payoff of 10,000 favorites!

I'm putting the details and math in a footnote, so that if I'm making a blunder, someone can point it out.

--Dunbar

* If we looked at 500 $2 place bets on favorites, about half of them will return $0, and the rest will return $2.10 up to $7 or more. But about 2/3 of the payoffs would lie in the range of $0 to $5. So we can estimate the standard deviation (of place payouts on favorites) at about $3.

When you take an average of something, you can estimate the uncertainty in that value with "the standard error of the mean". You get the standard error by dividing the standard deviation by the square root of the number of values in your average. For 500 place bets, the square root of 500 is 22. So, the standard error on the mean would be $3.00/22 = 0.14.

If you are trying to demonstrate that 2 numbers are different, you'd like them to differ by AT LEAST one standard error, preferably two standard errors. In the case of distinguishing a 15% takeout from a 20% takeout, the difference in average values (0.06) is much less than even one standard error after 500 bets.

If we looked at 10,000 favs, then square root of 10,000 is 100. The standard error becomes $3/100 = 0.03. Now, an observed difference of 0.06 would be meaningful. (because it would be 2 standard errors.)

[Dunbar]

What I just wrote in my previous post also applies to the "Contest" between place bets and exacta bets, except even MORE so because of the larger range of payoffs involved. (a larger range of payoffs results in a larger standard deviation.)

Unless one side is WAY better than the other, it is going to be impossible to detect the difference with any sort of statistical confidence without looking at thousands of place bets.

With that in mind, I see no point in tracking an additional 250 place bets, as I had said I would earlier. To resolve the Contest issue, we need someone with a huge queriable (is that a word?) database of results, like I think Cramer used to do for Barry Meadow's monthly publication.

--Dunbar

btw, I think the 3 posts above by btwind and S2S are particularly good.

[golfer]

OK, I understand no place betting. But, assuming a $100 total investment, how much do you play with your longshot on top/win bet compared to underneath in exacta... $70/30? $80/20? $90/10?