Favourite-Longshot Bias | Why Underdogs Are Overrated

The favourite-longshot bias refers to the tendency for longshots to be overrated, in terms of their chance of winning, compared to favourites. In other words, the odds for longshots are comparatively worse value than favourites.

It’s important for sports bettors to acknowledge the favourite-longshot bias in order to avoid taking low-value odds.


Why Are Longshots Often Overrated?

It’s been widely established that, across many sports, longshot prices are disproportionately shorter relative to their fair prices than favourites.

There are three mains reasons why I believe the favourite-longshot bias exists in sports betting:

1. Pricing Difficulties

In sports such as horse and greyhound racing a longshot often represents a little-known or out of form runner that has not demonstrated much ability to win the race. The longshot is certainly not the focal point of the event. This poses a problem for bookmakers: how can they price this obscure entity without getting it terribly wrong?

The usual approach bookmakers take is to refer to the betting exchanges as a guide for where to set the odds. But if the public also knows very little about an entity, then that’s going to be reflected with very low liquidity and wide spreads on the Betfair market. This doesn’t give much to go by.

Therefore the bookmaker has to make their own call as to where to set the odds. Very often that results in an extremely cagey, low-value price.

2. Risk Management

Sports bettors enjoy the excitement of the longshot. The average recreational gambler would sooner speculate on outsiders in hope of receiving a large payout than backing short-priced runners for smaller, more regular returns. Therefore longer-priced runners are typically over-backed relative to their likelihood of actually winning.

Naturally, this increases the risk for bookmakers: if the longshot wins, then they’ll need to shell out huge sums due to disproportionate sums placed at such high odds.

Bookmakers manage that risk by continually reducing the price as longshots attract more volume from bettors. While cutting the price reduces the average odds to pay out on, it also makes the longshot selection increasingly less attractive as a proposition. That way bettors are more likely to explore other options in the market.

3. Price Consciousness

Given that longshots tend to involve less-known entities, and that casual bettors often see them as a more exciting proposition than favourites, it’s all too easy for bookmakers to take advantage.

Sports bettors are more price conscious about what they know and understand. Even casual bettors will have an expectation as to where the price of a favourite should be. This might be based on observations, previous results — even previous prices. The same can’t be said for an obscure selection, with little or nothing to go by. Ignorance is easy to exploit.

But perhaps the biggest difference between backing a favourite and backing a longshot is that is that the longshot is often taken on the pure basis that it could, on the off chance, produce a very nice profit. You don’t back a favourite to win big — therefore you, at the very least, want the payout to be competitive. Essentially, bettors are happier to take sub-par odds on the longshot than the favourite.

Think of it this way: an 80/1 bet offers a relatively similar level of “excitement” to a 90/1 bet, yet the odds are substantially different. Let’s suppose that 90/1 is the fair price. Would an average punter realise, or care, that they’re getting such a bad deal by taking 80/1?

Bookmakers are aware that price consciousness is lacking at high odds and that the majority of punters won’t have the means to price up longshots, or the inclination to shop around before taking them.

To date, it’s still disputed why the favourite-longshot bias exists. But the above reasons make the most sense given the typical behaviours of both bookmakers and sports bettors.


Can I Benefit From The Favourite-Longshot Bias?

Firstly, for the reasons covered in the previous section, it’s important to note that Betfair will regularly offer substantially higher odds on longshots than bookmakers. Switching to Betfair is a very simple way of improving the value you take at high odds.

But the existence of the favourite-longshot bias doesn’t necessarily mean you should only be backing favourites, or basing your strategy solely around them. Nor does it mean you should neglect longshots entirely. As always, assess every selection on an individual basis.

Several betting strategies I’ve worked on targeted mid-market prices — not favourites or longshots specifically — for the following reasons:

  • Big shifts in the odds. Mid-market odds move more substantially than low odds. For instance it’s not uncommon for horse racing prices of 9.0 to fall to 6.0 later on in the day, meaning there’s ample opportunities to secure a value bets or trade in/out of positions at a profit.
  • Price uncertainty. Mid-market odds aren’t as well-formed as favourites, as they do not generate anywhere near as much focus (and thereby betting volume) from the public. An element of priceuncertainty exists with mid-market selections, meaning value regularly arises on them in the lead up to the event.
  • Decent liquidity. There’s more money available on mid-market odds than those at extremely high odds. So there’s greater certainty of getting bets away by targeting those odds.

Thus mid-market odds strike a good balance of liquidity and the potential to find value.


Proof Of the Favourite-Longshot Bias

If you’re intrigued by the favourite-longshot bias and would like to learn more on the theory, I recommend the following:

Toby @ Punter2Pro
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