Hello Forum, i'm trying to develop my understanding of how the the probability of one horse effects the price of another. Say for example a 2 horse race, the price of one obviously effects the other directly maintaining an even book.
Now say for example the favourite is strongly fancied and it starts to get backed in, the % chance of that horse winning increases which means the likelihood of the other runners decreases, is that % distributed equally among the other runners or would it effect the field depending on their price.
Ive noticed that in some situations that a 12/1 horse is backed into 9/1, yet the biggest drift is on the favourite and doesnt effect the field that greatly, this is mainly the reason for asking the question previously as my first thoughts would be that implied % chance is distributed equally, or am i missing something relatively simple ?
Distribution of implied chance when horse drifts
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JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
Hi
Just a quick reply. I have seen this debated many times and someone usually replies claiming to have run a spreadsheet a gillion (thanks Paul Merson) times and they can prove categorically there is no correlation between one horse moving in and another moving out.
Your thought is a correct one and your description is also correct. The only thing you have missed out is the mainstay of the market, namely money.
If you now think about the money aspect of things it makes perfect sense for the favourite to drift out in face of support for another horse. I can hear a few people asking why so let's deal with it. The market is balanced, it has to be, or else the book would violently fly under 100% or over 100% (more margin for error above 100) and then arbitragers would hoover up even more than they already do. If the book is to balance the market needs to move the money and so where better to look than the favourite? Look at the volume % of money attracted by any favourite and it is always greater than the rest of the field. So if the market wants to move the balance i.e. the money, the easiest way more often than not is to move the favourite's price.
Now admittedly this will not always apply but you will not go far wrong if you use this as a guide. Sometimes the support for a 12/1 shot will dry up and it will quickly reverse thus balancing the book. The favourite can hold solid so the 2nd favourite drifts to perform the balance. It will be determined by how short the favourite is and how strong its support is.
Does that make sense?
JG
Just a quick reply. I have seen this debated many times and someone usually replies claiming to have run a spreadsheet a gillion (thanks Paul Merson) times and they can prove categorically there is no correlation between one horse moving in and another moving out.
Your thought is a correct one and your description is also correct. The only thing you have missed out is the mainstay of the market, namely money.
If you now think about the money aspect of things it makes perfect sense for the favourite to drift out in face of support for another horse. I can hear a few people asking why so let's deal with it. The market is balanced, it has to be, or else the book would violently fly under 100% or over 100% (more margin for error above 100) and then arbitragers would hoover up even more than they already do. If the book is to balance the market needs to move the money and so where better to look than the favourite? Look at the volume % of money attracted by any favourite and it is always greater than the rest of the field. So if the market wants to move the balance i.e. the money, the easiest way more often than not is to move the favourite's price.
Now admittedly this will not always apply but you will not go far wrong if you use this as a guide. Sometimes the support for a 12/1 shot will dry up and it will quickly reverse thus balancing the book. The favourite can hold solid so the 2nd favourite drifts to perform the balance. It will be determined by how short the favourite is and how strong its support is.
Does that make sense?
JG
Many Thanks JollyGreen, so what you are saying is if the 3rd, 4th etc favourites start getting supported generally speaking the favourite will drift because the bulk % of the markets money is on the favourite. Simply put its easier, faster and more convenient to balance the market by moving the price where the bulk of the money is?.
Would I be correct in saying that if a favourite is backed in heavily, as a rule of thumb the horse with the 2nd largest trading volume would be the one to drift?.
Cheers
Would I be correct in saying that if a favourite is backed in heavily, as a rule of thumb the horse with the 2nd largest trading volume would be the one to drift?.
Cheers
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JollyGreen
- Posts: 2047
- Joined: Sat Mar 21, 2009 10:06 am
Generally yes, if the favourite is hammered the 2nd favourite is often the sufferer in terms of price.
It isn't always so cut and dry, sometimes the 2nd favourite can hold pretty stable and so the 3rd will drift badly. It is determined by how the horses stack up. If the favourite is genuinely strong (I know that is opinion but that is okay, it is important at the time) then it will be supported. If there is a bit of respect for the 2nd favourite (has a decent chance) then layers/bookies may not be keen on letting that price get too large so it may hold. That means the others will drift badly.
You can now take those descriptions and apply them to a combination of horses and the same principle will apply. Just remember the favourite is often the controlling factor in a market.
I hope that makes sense.
It isn't always so cut and dry, sometimes the 2nd favourite can hold pretty stable and so the 3rd will drift badly. It is determined by how the horses stack up. If the favourite is genuinely strong (I know that is opinion but that is okay, it is important at the time) then it will be supported. If there is a bit of respect for the 2nd favourite (has a decent chance) then layers/bookies may not be keen on letting that price get too large so it may hold. That means the others will drift badly.
You can now take those descriptions and apply them to a combination of horses and the same principle will apply. Just remember the favourite is often the controlling factor in a market.
I hope that makes sense.
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spreadbetting
- Posts: 3140
- Joined: Sun Jan 31, 2010 8:06 pm
Remember that 12/1 to 9/1 is only a change of around 2.3% in book terms, that easily gets swallowed up across the market and wouldn't necessarily happen in one swift move or on one horse.
A 2's shot would drift to around 2.1 to accommodate it all. But the make up of the market will usually determine where that % gets distributed in a 6/1 the field you probably wouldn't notice it whereas any chinks in a strong fav it may well start to move.
A 2's shot would drift to around 2.1 to accommodate it all. But the make up of the market will usually determine where that % gets distributed in a 6/1 the field you probably wouldn't notice it whereas any chinks in a strong fav it may well start to move.