The non efficient sports betting market hypothesis and closing line value

The Efficient Market Hypothesis in Sports Betting

Is the efficient market hypothesis in betting

Let's get straight to the point: The efficient market in sports betting is not really that efficient. When I say efficient I mean constantly precise. The efficient market hypothesis states that when a large diverse sample come together to form a market, the sum of the information leads to an accurate reflection of the fair odds. I state that it doesn't. An informed opinion may say not in sports betting markets, not necessarily, and not as often as people think. I call it the non efficient sports betting market hypothesis. If a shower of lemmings follow the leader off a cliff, what happens? Well, they probably die.

The money on the Betfair Exchange is largely a mix of recreational punters, professional players, betting consultancies. The money that generally controls the sports betting markets closer the off will include the big syndicates money, and the followers of syndicate money - the steam chasers, and piggy backers. Sharp individual early money instigates line moves in the sportsbooks, and then there's the head-fakers which is a practice that's been going on years. This is when the sharp players hit the early lines and limits to cause a move in one direction of the market, then they hit it back the other way for much bigger money closer to the off.

"I call it the non-efficient market hypothesis"


You could be forgiven for being totally befuddled now as to how close the line is at any time to the true probability of the events. I think bettors tend to be fascinated by the markets, a little fooled even, especially the less experienced punters. Being older and wiser now with a number of years immersed in these markets under my belt, a large part of what I see is a conglomerate of tin roofers. Speculators. Isn't that what we are all doing? It boils down to who can speculate the best. 

Compiling or originating our own betting odds Tissues

So why don't we cut out all the crap and concentrate on what's important?  Our tissue prices. A tissue is an odds draft of the market compiled to a true 100% book. Practice, watch, analyse and be confident in your odds tissues. 

What we are looking for when we finish pricing markets is outlier prices - we want to compare our tissues to the markets on OddsChecker, Betfair or on the Don Best screen in the US, and hope we find a few (preferably as many as possible) outlier prices we can take which are above our numbers - the further away the better as this means more predicted EV for us. We can stake proportionally to the EV in the bet (or discrepancy between attainable odds and true odds) - this is essentially the Kelly concept for dummies. The bigger the odds in our style of betting the higher the variance so to combat this we might want to set a higher EV threshold the more we move up the price range. 

The big betting syndicates and Closing line Value (CLV)

Quite often towards the close of betting markets the lines are moving due to the opinion of just a few people involved with the big money. Who is to say they are right? What if they are using a flawed model? Syndicates often work off a small edge of generally 2-3 % ROI which isn't ground breaking stuff. 

Let me put to bed some misconceptions about closing line value: Have you seen the abbreviation CLV bandied about? The "closing line value" argument is one of the topics dragging on in the professional sports betting industry right now and should be easily wrapped up in truth. There are reasons for this.

  1. All sports betting markets are different 
  2. There are more ways than 1 to skin a cat
  3. Certain markets are more efficient than others 

Everyone is suffering from confirmation bias believing it's their way or the highway when it comes to finding an edge in the markets and closing line value (CLV). On the whole over the long run closing line value is 1 of a few ways to measure performance in sports betting.

Closing line value (CLV) in sports betting
There are fundamental differences between the types of markets in various sports. There is a big difference between backing in short odds and long odds markets. Getting back to the efficient market hypothesis, liquid vs non liquid markets are vastly different. A highly liquid market in a popular sport will generally on the whole be efficient enough (but not always). 

For example the over / under totals lines in a premier league match between Manchester UTD and Liverpool. These lines will generally move after the team news comes out following a collective Bayesian inference style weight of money hits the market and the number will be very close to accurate when the game kicks off (mostly). On the opposite scale to this, in a run of the mill outright golf betting market you can basically take many odds movements in either direction with a pinch of salt. Speculation.  The market is quite weak in golf betting outrights. A 55% overround in a 100+ runner field is quite open to exploitation.

Efficient market hypothesis (EMH) and closing line value (CLV) Summary

To conclude, Closing Line Value (or CLV) in the long run is a decent indicator of performance over a decent sample size. It's a similar concept to the sportsbook profitably model, but for indicidual bets / markets in a vacuum is often useless. Every potential bet in different markets should be taken on individual merits and again we come back to practicing compiling your own tissue odds. Steam Chasers will be huge on CLV as it's their best benchmark to record their results against possible variance. Ultimately ROI over a decent sample will be the best measure of performance. 
  • How close does your ROI correlate to your (theoretical) expected value? 
  • Was the thinking behind your bets correct? 

Bryan Nicholson's 2nd sports betting book Hypnotised By Numbers will be out early 2022

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