Originally posted on 12/28/2011:

The nature of the regression to the mean in sports betting is probably the biggest issue a handicapper faces.

Think of it this way: two kinds of RTM, causal, and dilutive.

Dilutive RTM is just law of large numbers. Meaning, a past aberration isn't affecting the future, rather it's impact on an increasing set is being diluted with future results. So you flip a coin 5 times and it comes up heads, heads is batting 100%, but you flip it 100 more times and expand the set of results, and the results are 50/50 in those 100, heads is now 52.38%. The small 5-heads set you started with isn't affected by future results, or affecting them, it's simply being diluted by inclusion with those future results.

More interesting to us is the possibility of causal RTM. That's the theory behind counting the deck in blackjack (the elimination of certain cards leaves a changed deck and thus changed expectation). IOW, the expected future results change because of information revealed by past results. Semantically, this is a more intelligent use of the phrase RTM, because "to regress" is a verb, an action, and law of large numbers RTM is a result, a description, but that doesn't matter, we're here to make money, not theory.

SB lies in between. Consider a league of 32 teams, each exactly equal. They play 5 games. You would expect after that 5 games to have a team at 5-0, and one at 0-5 for that matter, on luck alone. Okay, if you knew the teams were all equal, you wouldn't change your line. But suppose you were the only one who thought they were equal (because you were an awesome handicapper), and that the rest of the market was reacting to results. Then the market would make the 5-0 team a big fave over the 0-5 team, and you'd have a great bet on the dog.

Then again, maybe you aren't an awesome capper, maybe you're not paying attention, maybe the 5-0 team is 5-0 because it's really, really good.

So like I said, RTM is the biggest, constant, base, central issue in handicapping. Do you think "The Broncos are a changed and great team with Tebow, they've gone 6-1, they're underrated!" or do you think "The Broncos are the same team with Tebow, they've just won 6 of 7 coin flips, they're overrated!"