Ok, so has anyone been to the horse track lately? I'm not talking about the Kentucky Derby or some other Triple Crown race. I'm talking about Saturday afternoon on an overcast spring day. Second string horses race for thousand dollar purses and a handful of some truly "down and out" people line up to give what little money to the house.
My question is this. How the hell are these markets efficient, especially at the smaller tracks? You have a bunch of yahoos betting on their "gut" feeling. This is not some sophisticated trading floor. Are there mispricings to take advantage of or does the house just take too big of a cut?
I hope this spurs a lively discussion, because it's of great interest to me as an avid race fan. Sadly, the only people at the track who make consistent money (besides the house, obviously) in my experience are the owners and the touts.
From what I've read, buying a racehorse is usually a pretty terrible investment (e.g. you either win or you don't) but buying into a racing consortium can work out really well. A lot of thoroughbred outfits will let you buy a piece of 80 or 100 different horses, and I think you could figure on a fairly consistent return in that case.
Kind of like a synthetic CDO of horses. lol
Exactly what I was thinking, Edmundo. Unfortunately, subprime assets in this CDO have a fate slightly worse than foreclosure.
Wouldn't you rather eat your subprime asset than see the bank take it?
You forgot the vets. They are making very good money for an easy job.
There is a track about an hour away from my hometown that is actually pretty nice, but I think it is along the lines of what you're describing.
Here's how I see it. The people who are actually solid at making the correct picks are generally going to have far deeper pockets than a person like myself who's there to get drunk and lose money for the fun of it (which is what you're average jerkoff is doing... he's putting 5 on a trifecta instead of a few grand on a horse to place for instance.) If you have enough people with this expert ability and money (which as I've said usually go together), they're going to keep wagering until the odds look less favorable. That sort of incongruity should make things fairly efficient.
I heard this from a friend, so take it for what it's worth, but he said that his friend would often go to the track and talk to the trainers and jockeys anytime he could. Be nice to them and they'll give you information that doesn't come out in prerace bulletins or whatever. The average bettor plays his gut and maybe some statistics about how the horse does on certain tracks or in certain weather, but there seems that there is a lot of additional information that you could use to gain your edge. Call it "insider trading", but I don't think there's any regulations against this.
My friend said that his friend managed to pay for school doing this a few hours a day after classes.
Happens all the time. Jockey's and trainers are great resources after looking at the daily racing form. The daily racing form will give you all of the horse's historic racing times, speed figures, and break its performance down pretty acutely with the stats. You can get a sense of whether or not the horse closes well, doesn't like to lose the lead, won by x amount, how its been training etc... It gets pretty detailed, and we could create a thread about handicapping techniques.
But all in all, its good to build up a little ring at the track and network if you want to have some color added to the numbers, hear how the horses have been training and whether or not they have a shot in a race. You can run into these people when if you go out to the track early in the mornings (say, 6-8AM), because they're timing their horses.
I had a prof in graduate school who used to be part of professional gambling group. They exposed mispricings at the racetracks....
The market in horse betting is probably very inefficient, but the vig is to high for almost anyone to make money. The house skims something ridiculous like 20% off the top which is basically like trading with a massive bid/offer spread. I suppose it is beatable by a few but I think you would be far better learning poker or betting sports where the house takes much less out of the pot. I am not saying that nobody can be profitable but you are starting with a huge disadvantage even relative to other games.
........
There was a section on this book called Fortune's Formula about how these guys ran their own horse (really successful) racing fund betting on the HK horse races. (If I recall correctly, the HK Jockey Club apparently books US$2bil worth of bets a yr...) But yea, agree with Bondarb, house take is like 15-25%. So no wonder why all the university buildings in HK have their name all over it.
Any bright monkeys keen to put forward some strategies?
US $2B is about right...may be a little light actually. BTW, whatever HKJC pulls in from horse betting, the underground bookies took more than double that figure. That's why Macau is now crazier than Vegas; Chinese do love to gamble.
I think I saw some form of this in a movie at one point. Two for the Money? Except replace sports with horse racing, Al Pacino with a not famous Al Pacino, and replace Mcconaughey with someone less douchey.
In The Education of a Speculator, Niederhoffer talks about finding an edge betting on horses.
Niederhoffer does not even have an edge betting on financial markets as proven by his multiple blow-ups.
I was really hoping for a lot more from that book. I was still trading when it first came out and I was probably one of the first guys to read it. I think I learned more about handball than trading. Not one of my favorites.
It has been shown that you can make a profit by exploiting behavioral biases..i think the most important one is the hot hand fallacy. however, the profits are super small after "transaction fees". I took a class on behavioral economics last semester and I remember reading a study on horse betting. I'll try to post a link/name when I'm home
still waitin for the link to drop
All wrong. Stand by the stables, watch for whatever horse drops a deuce right before the race, run and put it all on that horse to win. Works every time. Probably.
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