What does an efficient market mean?

[Bsims]

If a team has a spread of -4, what does that tell us? A few possibilities are.

1. They are more likely to win by 4 than any other score?
2. Their average winning margin will be 4 points?
3. They will win by more than 4 50% of the time and less than 4 (or lose) 50% of the time.
4. Something else.

[vampire assassin]

If you have an efficient market (like an NFL spread close to game time), a line of -4 -110/-110 means that on matches that don't push, half the time the dog covers, and half the time the favorite covers. The spread is the median result.

If it were -4 -160/+140, an efficient market suggests that the home team covers about 60%, and the dog covers 40% in non-pushing matches.

4 is also the median result.

[Optional]

I think it mostly means 2), that if they played that game ∞ times simultaneously the average margin would be 4.

[vampire assassin]

I think it mostly means 2), that if they played that game ∞ times simultaneously the average margin would be 4.

In NFL, look at 3 point home favorites. The average margin of victory is a lot less than 3.

[Optional]

In NFL, look at 3 point home favorites. The average margin of victory is a lot less than 3.

Could that suggest spreads at 3 are not so efficient? Or is it similarly off on all numbers historically?

[vampire assassin]

What do averages have to do with it? As long as an equal number of outcomes land on either side (meaning the median is 3, and it is very close), the book wins at -110.

Averages do matter on action points. Basic strategy is to bet any +2.5 dog, because the average of that group is less than 2.5, even though 2.5 gets very close to a 50/50 split.

[gojetsgomoxies]

it means long-term your return will be "negative juice"......... won't have people much worse than that either as you could do the opposite to them and then win long-term. could be someone doing much worse under special circumstances, but you typically can't do the other side.

[gojetsgomoxies]

What do averages have to do with it? As long as an equal number of outcomes land on either side (meaning the median is 3, and it is very close), the book wins at -110.
.

median vs. mean is interesting. might tie into moneyline strategy

[gojetsgomoxies]

i don't know what to think if nfl favorites of 3 points and less have a 55% win rate the last 5 seasons.......... inefficiency? or just volatility? data mining?..... i know campbell harvey has done a seminal paper on this for investment strategies.

[Slurry Pumper]

I think you're all wrong. The game actually has nothing to do with it. The market isn't the game score,
but the ability for the line to move. So if the line is -4, an efficient market would have takers on
both sides equally. If the line is inefficient the line would need adjusting to equalize the money. Now,
rarely does the market reach optimized efficiency. This is usually due to the line provider shading the
line to help mitigate liability, or take advantage of player biases based on previous experiences.

[KVB]

I think you're all wrong. The game actually has nothing to do with it. The market isn't the game score,
but the ability for the line to move. So if the line is -4, an efficient market would have takers on
both sides equally. If the line is inefficient the line would need adjusting to equalize the money. Now,
rarely does the market reach optimized efficiency. This is usually due to the line provider shading the
line to help mitigate liability, or take advantage of player biases based on previous experiences.

There is truth here and I have been debating just how much I want to get into this in the Tank.

There seem to be a lot of myths here to undress in a few of these Think Tank posts but one issue I have with this thread is the idea the the 4 line is a prediction of score, median or average.

That's simply not the purpose of the line.

I think we have to start there, at the most basic of concepts for posters to realize they might be going in circles.

[semibluff]

Efficient for whom?

[KVB]

Efficient for whom?

Exactly.

There's so much to unpack in the conversation.

In another Tank thread I saw a poster claim a market was efficient if the spread bets hit about 50-50 over time and then post a broad stat of every dog or fave.

Then, of course, it gets acknowledged that there could be subsets...blah blah blah.

You simply can't have it both ways, or can you?

I have posted 450 NCAAF Spread and Total bets over the last two years and am about 55% on those, beating the closing line as well in both win loss record and spread movement. I'm not tooting a horn, I'm having a down year, and I can post links to all of it. My point is that I don't think the markets were "efficient" in the sense that I was flipping a coin there. There are statistical tests to apply there as well.

In fact, I question the concept of efficiency in sportsbetting given what I know both about betting and bookmaking.

Bookmaking is a business with a long term outlook.

The definition of efficiency can't really even be agreed upon. Applying different math to make a definition of efficiency doesn't really work in sportsbetting, and I say that with reservation and qualification, because that's broad to say.

The bottom line is that there are many things to get wrong here, when trying to get something elusive right.

It's tough for us to even get on the same page with some of the basics...

https://www.sportsbookreview.com/forum/players-talk/3050399-equal-action-right-action-lol-didnt-read.html

I’ve often posted on how betting on sports is a three way street; and understanding all three ways will go a long way towards a few more winners and few less losers. There’s the odds maker, the bookmaker, and the player. I’ve discussed these relationships in the past, most notably, that it is player vs player (not player vs bookie) and the true costs of vigorish, and today I want to focus once again on the bookmaker’s perspective.

It is common knowledge that the book adjusts its line in hopes of maintaining equal action on both sides. This way the vigorish is an easy paycheck. But many of us know common sense is not always correct or the right sense. While smaller, independent neighborhood bookies might strive for equal action; this is not the case for larger pockets and big time houses.

Truthfully, it is almost mathematically impossible to get equal action on both sides, maybe close enough, but never equal. The esoteric know that sharp books or books reading the sharp players strive for certain amount of action on a game, not always equal action.

Let’s take a classic, simple example…for some a no brainer, for others perhaps enlightening.

For $11,000 worth of bets, equal action would have $5500 on each side. At -110 odds, the books pays one side $10,500 and keeps $500.

But this thread is about taking a position. One of the greatest bookmakers of all time has explained it differently.

So let’s say $6600 is bet on Seattle while $4400 comes in on San Francisco…all at -110. If Seattle wins, I keep $4400 and have to pay out $6000. I lost $1600.

If San Francisco wins, I keep $6600 and pay out $4000. I win $2600.

I, the book, basically have $1600 at risk to win $2600. On the same game, I have one team at about +163 while the public would have to risk $2860 for the same payout.

For sharp books (and those who can read their sharp players) with large pockets, worldwide, this is difference in risk vs. reward is how the sportsbooks can guarantee a long term profit in the marketplace they create.

Remember, bookmaking is not just a service, it’s a business. And while it is player vs. player from the bettor’s perspective, the bookmaker too exercises advantages over all his players.

Understanding the bookmaker’s perspective is sure to help you find a few more winners and can certainly take you off some losers.

Good Luck...

[Optional]

There is truth here and I have been debating just how much I want to get into this in the Tank.

There seem to be a lot of myths here to undress in a few of these Think Tank posts but one issue I have with this thread is the idea the the 4 line is a prediction of score, median or average.

That's simply not the purpose of the line.

I think we have to start there, at the most basic of concepts for posters to realize they might be going in circles.

How/why bookies set lines, or what their "purpose" is, is not really relevant to the OPs question as far as I see.


But I would be interested to hear the logic of how the spread is not indicative of the outcome in an Efficient market.

Surely by definition, from an end users point of view, efficient means predictive?

[KVB]

How/why bookies set lines, or what their "purpose" is, is not really relevant to the OPs question as far as I see.


But I would be interested to hear the logic of how the spread is not indicative of the outcome in an Efficient market.

Surely by definition, from an end users point of view, efficient means predictive?

Does it though? I understand that as predictions get better and better, if that were to hone the line, then one would be inclined just to set the line at the best possible prediction, or mean or median of infinite games.

But that's not how it works. Openers drive the flow of money and the bookmakers then manipulate that flow.

And when it comes to that, I would argue that the market overall might be seeking a 50-50 split (that's actually off topic believe it or not), but the road to get there is paved with "inefficiencies".

The goal of the line is not to predict the score, it's to achieve the desired amount of action in the desired place.

Do you know that sometime lines move back an forth simply for the sake of drawing action? Just to increase the handle.

There are many pro gamblers that I know, successful ones, that can't understand that concept.

[KVB]

You can handicap multiple ways and I do.

I use both a theory of fighting efficiency strategy and a theory of inefficient strategy. When I say theory I don't mean hypothetical, I mean it has evidence, and I can generate plenty of it. I also have decades of experience in this business.

Guess which method is more successful?

My point there is that it doesn't matter what one believes, the bettor should be looking at these markets through multiple lenses.

[Optional]

Does it though? I understand that as predictions get better and better, if that were to hone the line, then one would be inclined just to set the line at the best possible prediction, or mean or median of infinite games.

But that's not how it works. Openers drive the flow of money and the bookmakers then manipulate that flow.

And when it comes to that, I would argue that the market overall might be seeking a 50-50 split (that's actually off topic believe it or not), but the road to get there is paved with "inefficiencies".

The goal of the line is not to predict the score, it's to achieve the desired amount of action in the desired place.

Do you know that sometime lines move back an forth simply for the sake of drawing action? Just to increase the handle.

There are many pro gamblers that I know, successful ones, that can't understand that concept.

I agree completely.

But after all that has happened, and we have the closing number, when a bettor is talking about an efficient market, what else does it mean apart from it being predictive of score?

Predictive of their personal results being break even (less vig) might be an alternative?

[KVB]

I want to at least add some clarity on the idea of lenses.

For example, if I come up with a line that it far from the market, I could think I made a mistake, because how could I know so much more than the market, many bettors often do this. They subscribe to some kind of efficient market theory.

But with some handicapping, I don't expect the market to be "right". In fact, where I post plays, sometimes I mention several games we're looking at before the line or moneyline comes out.

I've made my prediction, and am predicting before the line comes out that there will be a big discrepancy.

This is because I am not only predicting what the oddsmaker is going to do to set money in motion, but often I am also predicting what the bookmaker is going to do about it. (I know, I know. Anymore, the oddsmaker and bookmaker are the same...yada yada...lol.)

Look at just this week.

As soon as the lines came out, I bought these two plays...

The KVB NCAAF Visiting Dog Fund has picked up...

339		2-Nov	BYU +6 (-115)
389			N MEXICO +6.5 (-115)

...

Those were my very first, market open early buys.

Just those two plays.

Look at them now.

[KVB]

I agree completely.

But after all that has happened, and we have the closing number, when a bettor is talking about an efficient market, what else does it mean apart from it being predictive of score?

Predictive of their personal results being break even (less vig) might be an alternative?

I don't think you can agree and then go on to talk about an efficient market. That closing number, no matter what has happened, is still not a prediction of score. Also, we can't change lenses mid thought.

And when we talk about all that has happened...there's a ton to unpack there too. Some lines got slammed and books didn't budge, some lines got slammed and it looks like RLM, some lines got slammed and moved that way, some lines were steamed, some frozen, some lines did several of these things through the week...you get my point?

The same thing doesn't happen with every line.

So that's where the "after all that has happened, and we have a closing number" doesn't mean we've all (all the games or lines) landed in the same spot on the same street. They all came down different paths. Those paths don't always converge.

I like that you are looking for an alternative, it makes sense to.

Definitely not arguing Opti. There just really is so much to unpack.

[Optional]

If you're talking about openers, it's lineman skill you are battling , not the market efficiency.


I didn't understand what you could have meant by this comment "one issue I have with this thread is the idea the the 4 line is a prediction of score, median or average."

Although from your last post you may have been talking about openers there too?


If we are talking about closing numbers and trying to analyze the efficiency of completed markets, do you think the difference between the spread and reality over a large sample is a measure of market efficiency to the bettor?

[Optional]

I don't think you can agree and then go on to talk about an efficient market. That closing number, no matter what has happened, is still not a prediction of score. Also, we can't change lenses mid thought.

And when we talk about all that has happened...there's a ton to unpack there too. Some lines got slammed and books didn't budge, some lines got slammed and it looks like RLM, some lines got slammed and moved that way, some lines were steamed, some frozen, some lines did several of these things through the week...you get my point?

The same thing doesn't happen with every line.

So that's where the "after all that has happened, and we have a closing number" doesn't mean we've all (all the games or lines) landed in the same spot on the same street. They all came down different paths. Those paths don't always converge.

I like that you are looking for an alternative, it makes sense to.

Definitely not arguing Opti. There just really is so much to unpack.

Me either

Maybe we are just on different tangents. You seem to be thinking about it from a how do I bet this individual game and is that one number helpful as a predictor.

And I am thinking about an infinite number of trials of one match, or the long term overall efficiency. And thinking that is tied to the spread having some relationship with real outcomes.

Hey I may be wrong. I was just trying to understand the point. Not argue i am right.

[KVB]

We're talking about the market right. That's the line. That's the opener, the closer, and everything in between.

We need to get even more fundamental.

But first...

...If we are talking about closing numbers and trying to analyze the efficiency of completed markets, do you think the difference between the spread and reality over a large sample is a measure of market efficiency to the bettor?

What reality? Whether the bettor won or lost or are we talking average line error here?

A lot of folks say the final score doesn't matter.

Maybe it does.

[KVB]

Me either

Maybe we are just on different tangents. You seem to be thinking about it from a how do I bet this individual game and is that one number helpful as a predictor.

And I am thinking about an infinite number of trials of one match, or the long term overall efficiency. And thinking that is tied to the spread having some relationship with real outcomes.

Hey I may be wrong. I was just trying to understand the point. Not argue i am right.

This is definitely not going to be about right and wrong, we are talking multiple lenses here. Like I said, I view the market through both.

I think shifting from whether there was a cover or not to the actual outcome and looking at average line error is a very fukkin good idea opti. Of course there is always some "smoothing" and that's where medians can come into play.

[Optional]

What reality? Whether the bettor won or lost or are we talking average line error here?

A lot of folks say the final score doesn't matter.

Maybe it does.

I am not sure how the bettor winning or losing comes in to comparing a -4 spread to reality... but we are obviously thinking about this from different universes if you are asking.

Maybe I am trying to be too simplistic. Anyway, carry on. I don't know how to re-ask what i have any more clearly.

[KVB]

I am not sure how the bettor winning or losing comes in to comparing a -4 spread to reality... but we are obviously thinking about this from different universes if you are asking.

Maybe I am trying to be too simplistic. Anyway, carry on. I don't know how to re-ask what i have any more clearly.

No Opti, we're not that far off. I was just referring to other posts in the thread there.

Vampire, a sharp in his own right, mentions half the spreads going one way and half another in the second post of this thread, with the line being a median.

It's fair for me to clarify that you meant scores as reality, as the 50-50 win loss only addresses the number of scores on each side of the spread.

If the market became efficient as it's refinement to the close converged with reality what would happen to the average line error?

I would think it would tend toward zero. Does it?

If the books wanted to hang a line that the largest money they work with regularly agreed with, they would sideline some of the most churned money in the world.

Yeah, some of that money might take out of the larger pool, but it's a small price to pay for the increased handle.

Why sit at 4 and take no action when I can move from 5 to 3 and and back to increase the handle? I could close it at 4. Did I just make 4 the efficient price?

For every game I do that, I can send another to 2.5 and another to 6 and close them there. I can create steam, or RLM , and get more bettors to make a move accordingly. I can make it all even out in the end, or I can reserve a piece along the way for myself.

See what I'm getting at? For the three closes I mentioned above, only 1 of them is at the "efficiency" of the 4 point line.

Interesting.

[Optional]

Oh yes, I get you now.

I am interested in the discussion but will just read. ;-)

[Believe_EMT]

excited to dig into this thread. but we need to start at the beginning with an equal understanding.

first, let's start with EMT

Statement:
an efficient market place is one in which an assets price reflect 100% of knowable information. do you agree?

Statement:
sports teams are just like any other asset, and sportsbooks (or locals) are still just a marketplace where investors or speculators can voice their opinions as to the true valuation through the buying or selling of an asset. do we agree?

[semibluff]

I don't believe opening and closing lines are helpful to a discussion about an efficient market. The opening line is made with the information available at the time. The closing line reflects the information available at the time AND the bets recorded. The information available when the line closes will, by definition, be less open to doubt. This doesn't mean by definition the line will be more efficient. For example the line opens will the availability of the home team's star player being in doubt due to injury. By the time the line closes the star player's availability will be known. Either way the line is likely to have moved substantially. Just because the star player is available and will start doesn't mean the line will be efficient. The effect of the injury can't accurately be predicted. From a predictive standpoint the outcome of the game would be easier to predict if the star player was definitely unavailable. The closing line from the negative 'possible injury availability' is likely to be more efficient than the closing line from the positive 'possible injury availability'.

If an NFL market closes with the home team favoured by 11 and the Total set at 47 what it absolutely does NOT mean is the home team is expected to win 29-18. Both 29 and 18 are comparatively unlikely scores. 30-17 or 27-20 are statistically more likely.

[Believe_EMT]

In NFL, look at 3 point home favorites. The average margin of victory is a lot less than 3.

source please. unless you are talking about a meaningless sample of games. i see since the 2008 season (we can change the time period if you wish):

home faves of 3
SU 126-100

ATS: 95-111-20

looks like a favorite wins SU but loses ATS 4.8% of the time.
or we could more strict and say in games a home fave of 3 wins, they do so by less than 3 pts 11% of the time. 89% of the time those wins are by 3 or more.

so this an efficient number.

why?

you're losing money regardless of which side you play long term.

now we could bell curve this thing out nicely with a high percentage of the results clustered around the 3 pt margin of victory.

[Gaze73]

Today I liked a +1000 soccer dog pre game and bet on them. In the first half they went up to +2000 despite playing well. I made another bet at this crazy price. They won 2:1. I thought the odds were insane and they were because the market is inefficient.

[vampire assassin]

Why sit at 4 and take no action when I can move from 5 to 3 and and back to increase the handle? I could close it at 4. Did I just make 4 the efficient price?

There are two groups of players. Those that are smart and win, and everyone else. If you are a market tester (like Pinnacle and Cris), you only care about one group of players: those that are smart and win. If you hold 0% (break-even) against that group, you are doing fantastic. If you move around unnecessarily, that smart group will punish you with each move.

The market testers don't care about non-sharps. Those players will lose at a consistent rate, pretty much no matter what price you offer.

If you are a square book that caters to only idiots, and throws out smart people, there is a different theory to trading. You can trade off of public sentiment, and gauge the public. The trade-off is that the more you blatantly do this, the more that some sharps will beard in, and the more than some of your idiots might become less-square. Educating idiots is a long-term cost that most books don't weight as much as they should.

If you're trading to the public and you know the side they like, you might go from 4 to 5 and hold it when the sharp book are at 4, but you'd never go back to 4 (or 3) unless public money made your position intolerable from a risk perspective, in which case your original move to 4 was probably bad.

[veriableodds]

vampire assassin is correct. Most of you guys are chasing the white rabbit, the books will age, take your money, drive you thru insanity @ back, and spit you out. For the math geniuses that love for the learning aspect that's great, its not a risk cause your not stupid and already ascertain the inherit risk . This game is only for the 2% . Stock market, high yield cd(s), options, currency trading is way more beatable and far more productive then this.

[CappinTerp]

An efficient market = Liquidity !

[Believe_EMT]

Exactly.
There's so much to unpack in the conversation.
In another Tank thread I saw a poster claim a market was efficient if the spread bets hit about 50-50 over time and then post a broad stat of every dog or fave.

Then, of course, it gets acknowledged that there could be subsets...blah blah blah.
You simply can't have it both ways, or can you?

and i will continue to do so. built my entire MLB approach on the belief in an efficient market and creating positive closing line value is the strongest indicator.

any acknowledge of subsets is made to discount and warn against fallible humans reaching back into to history to carve out situations that were previously successful. trend betting built marc lawrence a fortune, or should we say selling the illusion of trend betting being somehow profitable.

we can rip and filp historic numbers to fit any half baked (best movie ever) concept of profitable subset. they don't exist. if they did exist, and there was once was an Edge, it is gone because the market is efficient and continually evolves. the penalty for repeatedly making mistakes is to go broke. the sports betting market is darwinian, in the most basic form of jungle law.

the outcome of a single match does not matter. the accumulation of single matches at a specific line that stretches into the hundreds of trials will produce efficient results.

reality:
when producing +CLV my selections win money long term
when producing -CLV my selection loss money long term

perhaps we are going apples and oranges here, but if the market were inefficient, CLV would mean nothing. in reality, CLV is the defining character of a profitable bettor.

[Sanity Check]

If a team has a spread of -4, what does that tell us? A few possibilities are.

A spread of -4 tells us.

THAT IS THE NUMBER BOOKS BELIEVE WILL MAKE THEM THE MOST $$$.

"Efficient markets" are an oxymoron term HFT algorithmic traders invented to justify them automating cross platform ARB trading.

It means less than nothing as the global gold standard is markets producing goods/services as inefficiently as possible, rather than the polar opposite.