Favorite-Longshot Bias
generalThe favorite-longshot bias is a market inefficiency where favorites are under-bet and longshots are over-bet, leading to favorites having higher than expected returns and longshots having lower than expected returns. This bias is often attributed to bettors' risk-seeking behavior.
Key Takeaways
- 1The favorite-longshot bias is a market inefficiency where favorites are under-bet and longshots are
Favorite-Longshot Bias
The favorite-longshot bias is a market inefficiency where favorites are under-bet and longshots are over-bet, leading to favorites having higher than expected returns and longshots having lower than expected returns. This bias is often attributed to bettors' risk-seeking behavior.
Example
A horse with 2/1 odds wins more often than the odds suggest, while a horse with 100/1 odds wins less often, demonstrating the favorite-longshot bias.
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