What are the chances of being a profitable punter?

Today, we would like to start our sports betting guide with one quite important aspect, called the efficient market hypothesis (EMH). It basically means that the market itself represents the true value of assets and their prices, thus making it impossible to beat the market regularly.

While the theory is mainly focused on stock markets, it has also found its wide application in sports betting. Speaking about the EMH in betting, we assume that the market offers punters the odds, which are accurately reflecting the true outcome probabilities of the events. This means that the odds offered for team A beating team B in a football match (margin excluded) supposed to be an efficient representation of the true probability of such an outcome. In reality, though, using the same example, we can end up on both sides of a wager, meaning our bet can either lose or win. However, looking at a bigger picture (a bigger data set), you will see that all of these individual outcomes will cancel out due to the law of large numbers. As a result, it still makes enough sense to call such odds an efficient representation of a true probability, even though it is impossible to know exactly what is going to happen.

Predictability of sports disciplines

Things get a bit more complex if we are going to consider the individual bets instead of larger data samples. The problem hides in the following: since we are not able to know the actual true probability of a single outcome, then how can we evaluate the efficiency of the price it is represented by. Let us show you a quick example. Assume the data set with only fair even odds (2.00 (1/1) no margin). Let’s say 50% of the bets win, which should correspond to the aggregated 50% win probability of those wagers. In other words, it is clearly showing us that the price is a good representation of those win probabilities. The only problem in this case, however, is the fact that the results we just found tells us nothing about the individual outcomes but only about the overall average. It basically tells us that the market altogether is efficient but the efficiency of the odds of the individual bets is still unknown.

Speaking about the efficient market theory, we cannot forget to mention the world’s greatest investor Warren Buffet. Let us remind you that efficient market suggests that it is impossible to beat the market. However, it seems like the rule does not apply in his case. Just for comparison purposes, the S&P 500 has averaged the 9.7% annual returns since 1965. On the other hand, Buffet’s Berkshire Hathaway has more than doubled the results of the S&P 500 over the same period of time, producing a 20.8% gain per year. Well, if the market is really efficient, then how come Buffet beats it by a double year after year?

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Some experts say it is simply luck and Warren Buffets success is just an extreme example of survivorship bias. Whether it is a case or not, one study has found that a randomly chosen investor has a 0.07% chance to match or better Buffet’s results. Seems quite unlikely, doesn’t it? Altogether, considering all the contributing factors, the magnitude by which Buffet constantly beats the market almost entirely eliminates the «luck» as a reason for his success. Thus, if the skill is the main factor, such an investor should simply not exist, according to the efficient market theory.

Skill paradox in betting

Finding an edge over bookmakers or the market is not a very simple task. It usually requires you to either to be in possession of superior information that is not available for the rest of the market or at least its vast majority, or view things from the different perspective using the widely available one. The only problem here is that the market is usually shaped by bigger parties like betting syndicates or whatsoever that have access to the enormous amount of information that is simply unavailable to smaller bettors. This gap allows bigger parties to control the market by moving the lines, which in return makes things even more complicated for the average bettor. While it seems too much to cope with, it never means that you have to quit trying. Finding your own betting strategy is an ultimate task of every single bettor. Professionals spend years finding an efficient betting model. What is more, being a profitable punter, does not mean only beating the bookmaker, managing your bankroll and applying a suitable staking method is equally important to your success.

You can learn more about how to become a better punter in one of our online sports betting guides.

Summing up, even though something like the efficient market theory exists, it never means gaining an edge over the market is impossible. Dedication, hard work and consistency are the keys to success. Learning more about betting and constantly testing out new things is the only way to achieve success in this field. Thus, stay patient and slowly develop your own way towards becoming a profitable bettor.

Introduction to sports betting