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Here is my approach to pricing up handicaps…
While it would seem that "pricing up" a handicap is the most difficult task of all this is not necessarily the case. For a start you can give the handicapper the benefit of the doubt, bowing to his superior knowledge of the form-book, and assume that, this being a handicap, all the horses have an equal chance! Of course, in an imperfect world, this is not true but it is a good starting assumption to make and allows us to begin to form our book. <br>So, in a hypotethical, ten-runner perfectly-framed handicap we have ten 9/1 shots. <br>However, let’s suppose one of the runners is out-of-the-handicap, say by ten pounds, and another has not run for over a year and even then was showing very little form. We decide to discount these runners. We are left with eight contenders – eight 7/1 shots. <br>Again, however, it being an imperfect world, we have to allow for the bookmaker’s margins even in the most competitive of betting markets – so, eight 6/1 shots. <br>Now, it is unlikely that any handicap will be so even that this will be the shape of the market but it is reasonable to assume that there will be 6/1 shots in there. If we order the horses from 1 to 8 depending on how likely we think they are to win, numbers 4 and 5 on this list can be deemed 6/1 shots. Now our market is starting to take shape. <br>If it is not possible to break things up distinctly in terms of order 1 to 8, we can at least break the runners up into groups: the three most likely, the three least likely, the two in the middle – our 6/1 shots. <br>Now we can compare the others, say the outsiders first, to our 6/1 shots. How do their chances compare to these horses? We might have one which is up in class, we might not like his chance and deem him a 12/1 chance. Another, unlikely to appreciate the ground, we find similarly hard to fancy and we put this one in at 10/1. But the third one we now find hard to separate from our 6/1 shots and we put him in at 7/1. <br>Next question is "how far have we strayed from the 6/1 average in pricing up these outsiders?" In other words, "how much do we have to shorten the favourites below the average in order to keep the book balanced?"<br>Well, 6/1 equates to a 14.3% chance, and three of these gives us 42.9%. Instead, in our example, we have 7.7% (12/1), 9.1% (10/1) and 12.5% (7/1), totalling 29.3%, a shortfall of 13.6%. <br>This we must make up in pricing up the more fancied runners, so their combined chance is now 42.9% (3@6/1) + 13.6% = 56.5%, or 18.8% on average, making each roughly a 9/2 chance. <br>Now, do these three horses have an equal chance? We might decide that it is tight but that we can distinguish. And again we can set the middle one to our average price, so, our second-favourite is a 9/2 shot. We cut our favourite to 4/1 and push our third choice to 5s.<br>The market on our hypothetical handicap looks something like this:<br>4/1, 9/2, 5/1, 6/1, 6/1, 7/1, 10/1, 12/1, 25/1, 40/1. <br>As you can see using this method there will always be a close correlation between the number of runners and the average odds available – which, in the ideal case scenario, is how it should be. It is something I have become wary of in the past couple of years – betting in races where there are a large amount of runers, say twenty or over. In these situations it becomes more difficult to convince yourself that you have attained fair odds against your selection. This is because it is rare for the favourite in any race to start at double-figure odds – this just is not a favourite’s price. In the numerous 30-odd runner sprint handicaps during the flat season how often do we see at least a few of the fancied horses starting at odds less than 10/1? This is ridiculous. Allowing for the often inscrutable nature of the draw in such events and that usually ALL of the runners are on their correct handicap marks, it seems foolhardy to accept even less than 20/1 on any runner!<br>I prefer races with, say, 8 to 14 or so runners, where there are strong grounds for counting out certain runners and where after that things begin to converge at 4/1 or 5/1 the field and where you can form a conviction about what price your selection should be and then look to consistently attain a point or two longer than expected – the internet betting exchanges have been a godsend in this sense. <br>I would have to concede that there is one obvious contradiction in the methods I adhere to at present. The argument for attaining value, founded on the idea of ascertaining the probability of any outcome (see "Value Betting" – Mark Coton, where the argument is built up very neatly from the analogy of the coin-toss), depends for it’s success on multiple repetitions of the event. But in horse racing each race is only run ONCE. Even if you argue that the method is aiming towards profiting in the long-term, that if you consistently get value on your selections it will even out in your favour, I believe there remains a tension between the "value" method and being selective about the races one applies it to.
(I’d like to come back and read more of this thread when I get a chance but…)<br>The main problem that I see with the value argument is that each event is only staged ONCE. <br>Ok, you can argue that over the long run consistently getting 6/4 about a "true" EVENS chance will pay off but they are still separate events.<br>To win in the long run you need a strike-rate which is higher than the average odds you bet at. So, most importantly, regardless of odds, you have to pick winners!
