Do Sportsbooks Speculate? Do They Always Know The ‘Right’ Price?

Something every experienced sports bettor will inevitably ponder is whether or not bookmakers manage to accurately price all of their odds. After all, there’s such an enormous spectrum of events and markets — how can they possibly get it ‘right’ every time?

For popular events bookmakers have the knowledge, experience and means to competitively price their odds, while factoring in their profit margin. But for less popular events there’s less external sources of information to go by, and therefore a degree of speculation is required for setting the odds. This poses a risk that bookmakers are aware of, and attempt to mitigate.

In this article I give examples of situations where bookmakers might speculate with their pricing and explain how this impacts bettors.

 

When Do Sportsbooks Speculate?

The bookmakers aren’t as all-knowing as we’re lead to believe. They regularly take a speculative view on an event because they have no better option. But ultimately, they don’t need to know everything in order to make a profit.

Here’s cases where bookies might speculate with their odds.


Highly Niche Markets

Generally speaking, if sports bettors struggle to find useful information (historical data, news, analytics, insights etc) to support a specific bet, then bookmakers will also have difficulty pricing it.

This is most common for highly niche markets. For instance, the match odds market for fixtures in the Estonia U19 League.

To have an accurate view of an Estonian U19 fixture you’d need to actively follow the league or at least know of reliable sources of historical data. Some of this may not be available in languages native to a lot of bookmakers.

Theoretically the bookmaker could devote resources into research and data collection in order to accurately price niche odds. But some markets aren’t popular enough to warrant that much dedication or investment. So instead they choose to speculate, basing their view around what limited information they have to go by — but ensuring that a significant margin is factored into the odds.


Little-known Competitors

Bookmakers are known to speculate on little-known competitors within a sport. For instance, an upcoming horse race might involve a little-known or out of form runner with no previous records (at least at this level) to go by. So how does the bookie go about pricing this horse?

The usual approach bookmakers take is to refer to the betting exchanges as a guide for where to set the odds. This means following the public opinion (which is remarkably accurate). But let’s say the public also knows very little about the horse either. Well, that’s only going to be reflected with very low liquidity — which wouldn’t give much confidence to the bookie.

So in this scenario the bookmaker has no choice but to speculate as to where the odds should be. If they take the view that this horse could be a “wild card” with the potential to cause an upset, then that would result in an extremely cagey, low-value price. On the other hand, the little-known runner might be viewed as having no chance which can results in a positive price inaccuracy that in-the-know bettors see as a value betting opportunity.


No Other Prices

The majority of (soft) bookmakers base their odds around the prices available at betting exchanges and other sharps — such as Pinnacle. However, the less popular an event is, the fewer trustworthy prices they’ll have to go by.

For example, if a bookmaker runs specials or unique markets, it’s unlikely other bookmakers or exchanges will have comparable markets that they can base their odds around. In this situation the bookmaker would have to research the potential outcomes in order to assign probabilities to them, and then convert them into odds. Thereafter, the public will shape the odds; extreme volumes on one outcome would suggest the value is too high, and therefore needs lowering. Low volume would suggest the outcome requires a price increase.

Provided the bookmaker can manage a balanced book with an overround, inaccuracies will not negatively impact profitability. Essentially bookies can get away with setting inaccurate prices and lacking knowledge, provided they manage their books.

Learn how bookmakers earn a profit.

 

Can I Capitalise On Speculative Prices?

As sports bettors we’re inclined to think that price inaccuracies means an opportunity to profit. But as speculative as some odds may be, they’re not always good to take.

Speculative odds are often underpriced. As I’ve mentioned in the previous section: if bookmakers have only little to go by when setting the odds, then they may err on the side of caution to avoid being exploited. This presents little or no opportunity to bettors.

Furthermore, speculative prices are likely to be capped at low stakes by the bookmaker, thereby limiting any potential profitability. And switching over to the betting exchange may not prove to be any more fruitful if the liquidity is low (or the market doesn’t exist to start with).

But there are potential upsides to targeting speculative odds.

Some of the most successful tipster services are known to specifically target early horse racing odds in order to capitalise on speculative odds posted by bookmakers the day before a race. Followers of such accounts snap up value and drive the odds into line as the race day approaches.

But even so, the same old problem remains: if you consistently bet on value, your accounts will eventually be limited. So targeting inaccurate odds while staying undetected is a whole other matter in itself.

Toby @ Punter2Pro
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