Think you're an expert bettor? You're probably wrong

January 2, 2014, Springer

If there's one thing you can bet on in horseracing, it's this: so-called successful bettors will always think that their little black books hold superior 'inside' knowledge that makes them experts. However, in the long run, the majority of horseracing punters will lose money at the track – and there will always be more losers than winners. Serious punters will often keep track of how well they are doing, in the fond hope of identifying a 'winning system.' So says Matthew Browne of CQ University in Australia, whose research group found that the amount of wins required to show that one is doing better than chance is extremely high. The results are published in Springer's Journal of Gambling Studies.

Gamblers who participate in skill-oriented games such as poker and sports betting are motivated to win over the long-term, and some monitor their betting outcomes to evaluate their performance and proficiency. To investigate what levels of sustained returns would really be required to establish evidence of skill or expertise, Browne's team modelled a random strategy to simulate so-called 'naïve' play, in which equal bets were placed on randomly selected horses using a representative sample of 211 weekend races.

The results showed surprising volatility, even after a large number of repeated bets. After adjusting for the house advantage, a gambler would have to place over 10,000 bets in individual races with net returns exceeding nine percent to be reasonably considered an expert bettor. This means that for the vast majority of players, their historic records or data provide surprisingly little information regarding their chances of making a positive return in the future.

Browne says that even sophisticated and rational gamblers, assuming they have achieved moderately good returns over an extended period, are simply unable to recognize that their historical performance most likely occurred simply due to chance.

Browne explained, "Imagine you had bet on 1000 separate races, choosing horses carefully according to their merits, and were 'up' by 20 percent. It would be easy to conclude you had a winning system, or above-average skills. But counter to every intuition, you were probably just lucky." He ascribes such false beliefs among horseracing bettors to the combination of cognitive biases, and the strong volatility intrinsic to returns on race betting, labelling it a 'delusion of expertise.'

The findings have important implications for problem , as delusions of expertise are likely to be most prevalent in skill-oriented games and in serious, otherwise rational, performance-tracking gamblers. Browne and his team say that the development of such fallacies and biases are shared between race handicapping and other nominally expert pursuits such as chartist exchange-rate speculation and professional poker.

"In any game where returns are highly volatile, and there is a reasonable expectation that skill plays a role, delusions of expertise may come into play," comments Browne, who adds, "In horse betting in particular, it appears that a gambler may easily be misled into believing that an effective winning strategy had been identified, when in fact it was due to chance alone."

It seems that it is intrinsically difficult for people to objectively evaluate their own performance under these conditions. Browne concludes, "Unfortunately, it appears that historical performance at the track is often either ambiguous, or positively misleading, for gamblers considering their own returns."

Explore further: 50 years on, UK betting shops lure new breed of punters

More information: Journal of Gambling Studies. DOI: 10.1007/s10899-013-9420-7

Related Stories

50 years on, UK betting shops lure new breed of punters

May 9, 2011
Fifty years after legalisation, the UK's betting shops are attracting a new type of customer. This widening appeal may have harmful consequences in terms of problem gambling, argues initial research findings funded by the ...

It's a sure thing: Knowledge of the game is not an advantage in sports gambling

March 19, 2013
Psychologists have traditionally characterized compulsive gambling as an "impulse control disorder," and treated it by addressing the patient's obsessive tendencies. But according to Prof. Pinhas Dannon of Tel Aviv University's ...

When deciding how to bet, less detailed information may be better

May 13, 2013
People are worse at predicting whether a sports team will win, lose, or tie when they bet on the final score than when they bet on the overall outcome, according to a new study published in Psychological Science, a journal ...

Recommended for you

People with prosthetic arms less affected by common illusion

January 22, 2018
People with prosthetic arms or hands do not experience the "size-weight illusion" as strongly as other people, new research shows.

Intensive behavior therapy no better than conventional support in treating teenagers with antisocial behavior

January 19, 2018
Research led by UCL has found that intensive and costly multisystemic therapy is no better than conventional therapy in treating teenagers with moderate to severe antisocial behaviour.

Babies' babbling betters brains, language

January 18, 2018
Babies are adept at getting what they need - including an education. New research shows that babies organize mothers' verbal responses, which promotes more effective language instruction, and infant babbling is the key.

Inherited IQ can increase in early childhood

January 18, 2018
When it comes to intelligence, environment and education matter – more than we think.

College branding makes beer more salient to underage students

January 18, 2018
In recent years, major beer companies have tried to capitalize on the salience of students' university affiliations, unveiling marketing campaigns and products—such as "fan cans," store displays, and billboard ads—that ...

Modulating molecules: Study shows oxytocin helps the brain to modulate social signals

January 17, 2018
Between sights, sounds, smells and other senses, the brain is flooded with stimuli on a moment-to-moment basis. How can it sort through the flood of information to decide what is important and what can be relegated to the ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.