Chapter 13 · Worked solutions
Chapter 13 workings: The Market's Bad Habits
Chapter thirteen worked: testing a favourite-shortening claim over 200 matches, a fatigue price at 6/5, and what an 80/1 first scorer really costs.
The first exercise is about evidence rather than arithmetic: a gap only means something once it is compared with its own standard error.
The exercises
Is the club always overbet?
Over 200 matches the closing prices implied a 62 per cent win rate on average; the club won 118. Judge the claim.
Actual rate
118 ÷ 200 = 59 per cent, three points under the claim.
Return at those prices
Backing every match at the fair price for 62 per cent (1.613) returns 118 × 1.613 − 200, about −4.8 per cent.
Standard error
√(0.59 × 0.41 ÷ 200) = 3.5 per cent: the gap is less than one standard error.
The answer
The direction fits the claim, the evidence does not yet prove it: keep collecting.
48 per cent at 6/5
Your unadjusted model makes a side 48 per cent; the price is 6/5. Break-even, EV, edge.
Break-even
5 ÷ 11 = 45.5 per cent.
EV
0.48 × 2.2 − 1 = +5.6p per £1, an edge of 5.6 per cent.
The answer
Break-even 45.5 per cent; EV +5.6p; a bet if the 48 per cent is honest and the fatigue discount is unfounded.
An 80/1 first scorer at 0.8 per cent
You rate a striker's chance of scoring first at 0.8 per cent; he is 80/1.
The claim
1 ÷ 81 = 1.23 per cent.
EV
0.008 × 81 − 1 = −35.2p per £1.
The answer
The price claims 1.23 per cent; the bet is worth −35.2p a pound.
These are the workings. The argument for them, and the exercises themselves, are in chapter 13 of the book, The Market's Bad Habits.
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