Handicapping Horses is NOT About Picking Winners

There is a lot of literature available on handicapping horses. The focus, invariably, is on determining which horse is most likely to win a given race. However, as Robert Rowe points out, the favorite only wins about 33% of the time. The fact that the favorite usually loses teaches us something, however. The outcome of a horse race is probabilistic, not deterministic. The handicapper's job is to know the probability for each horse to win. With the probabilities in hand and the odds on the tote board, the handicapper can identify positive expectation bets.

Granted, players that bet on the favorites fare less poorly than the public at large (losing only 11% of each dollar wagered as opposed to 17% - 20%), however they are still losing. And although the favorite wins more often than any other horse, the favorite still loses 2 out of every 3 races. So while focusing on likely winners seems likely to be a good starting point, it is not enough. With the proliferation of sophisticated handicapping tools, the favorite's winning percentages have increased from 31% to 33% (i.e. the public has been right more often) but this hasn't changed the expectation value of betting on favorites because the odds on the favorites have been less favorable.

Each race has between 5 - 12 betting opportunities. Each opportunity will, on average, have a negative expectation between 17% and 20%. However there is variability in the expectation value. With a reasonable standard deviation, which past experience has demonstrated to exist, it is likely that within each race there are 0 - 2 positive expectation bets. A positive expectation bet is one where the probability of a horse's winning times the payback (including initial wager) is greater than or equal to the initial wager.

A good handicapper may also find may additional positive expectation wagers in the exactas, trifectas, and other exotic wagers. The key is to know the probability of each possible final outcome. Then the math is the same. Probability times payout must be greater than the layout. If a handicapper is correct in their assessment of the probabilities and makes only positive expectation wagers they will win in the long run. Andrew Beyer, a proponent but not a slave of speed handicapping, tells an excellent story of how he laid down several thousand dollars in double triple combinations to win 1/10 of a 1.3 million dollar prize. This was not done by luck, but by knowing which horses had decent probabilities of showing and then betting every possible combination of those horses.

This all sounds great in theory, but does it work? We weren't sure how we'd do going into our first season as NFL oddsmakers ( bestofblog.net ) but we finished at 62% against the spread (93 wins verses 57 losses). We're in the process of developing our system of determining the probabilities of each horse winning. We'll see how it goes and we'll keep you posted. Unlike the NFL, however, when we couldn't move the line and were therefore able to post our picks days before game-time, we're unlikely to do that here. Again, we'll see. Our season (Emerald Downs) doesn't begin until April.