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College football national championship odds: For entertainment purposes only - Printable Version

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College football national championship odds: For entertainment purposes only - Papa John - 05-11-2015

Courtesy of the Westgate SuperBook via ESPN's Kyle Bonagura:

http://espn.go.com/blog/pac12/post/_/id/86653/pac-12-odds-to-win-the-national-title

Stanford has the fourth-best odds among Pac-12 teams to win the national championship (40-1) behind favorite U-S-C (15-1), Oregon (20-1) and UCLA (20-1). Of course, as Kyle Bonagura points out--and folks tend to forget--these odds are created so that people will spend their hard-earned money on sports bets. The Vegas odds should not be viewed as "honest" predictions of how likely it is that these teams will win the NC.

I don't really have much to add, except that Oregon is not winning the NC, because Stanford is taking the Pac-12 North in 2015.

Re: College football national championship odds: For entertainment purposes only - washingtonismoney - 05-12-2015

(05-11-2015, 11:48 PM)Papa John link Wrote:Of course, as Kyle Bonagura points out--and folks tend to forget--these odds are created so that people will spend their hard-earned money on sports bets. The Vegas odds should not be viewed as "honest" predictions of how likely it is that these teams will win the NC.

Two things:

1) I dunno, whenever someone posts odds it's mere seconds until someone posts why it's not really a prediction.
2) Of course, people usually stop their analysis there: that because it's not meant to be predictive, odds are not, in fact, predictive. This analysis is plausible, but without empirical detail. And in fact there's a plausible theory to believe it doesn't matter: http://en.wikipedia.org/wiki/Efficient-market_hypothesis

If the just-for-entertainment-purposes odds are systematically wrong, then people gambling would win frequently. And if they did, casinos would lose money. In essence, people who believe that the odds are merely for entertainment purposes and have little-to-no-predictive-value should also believe that casinos lose money from gambling and that there are large classes of professional gamblers. I don't think that describes the real world.

Re: College football national championship odds: For entertainment purposes only - Papa John - 05-12-2015

(05-12-2015, 05:44 AM)washingtonismoney link Wrote:If the just-for-entertainment-purposes odds are systematically wrong, then people gambling would win frequently. And if they did, casinos would lose money. In essence, people who believe that the odds are merely for entertainment purposes and have little-to-no-predictive-value should also believe that casinos lose money from gambling and that there are large classes of professional gamblers. I don't think that describes the real world.

Well, if the odds are systematically correct, then the people gambling would win just as frequently. My understanding is that there is a group of folks who give the casinos the "honest" odds and then the casinos manipulate those to make their profit.

In summary: when I see odds, I think gambling. When I see probabilities, I think prediction.

Regardless, may the odds be ever in Stanford's favor!

Re: College football national championship odds: For entertainment purposes only - washingtonismoney - 05-12-2015

(05-12-2015, 09:24 AM)Papa John link Wrote:Well, if the odds are systematically correct, then the people gambling would win just as frequently. My understanding is that there is a group of folks who give the casinos the "honest" odds and then the casinos manipulate those to make their profit.

Theoretically, sure: fifty percent winners, fifty percent losers, and theoretically the winners could just keep on winning. But in practice the winners do not stay hot; they give back their winnings over time. That's because in sports gambling -- as with the stock market -- it's  very difficult to win consistently without an edge. Such as some sort of systemic problem in casino odds. (Or match-fixing, a problem in tennis and soccer.)

Since we don't really see a class of systemic winners in gambling, it seems more likely that the sports gambling market is efficient -- and therefore that the odds are reasonably good proxies, based on current information, for what we can expect to happen in the future.

Re: College football national championship odds: For entertainment purposes only - terry - 05-12-2015

The odds are a prediction. To be specific, they're a prediction of how gamblers will bet. That's probably pretty close to a reflection of the consensus prediction for the outcome of the sporting event. But it's not the same thing.

Re: College football national championship odds: For entertainment purposes only - CrazedZooChimp - 05-12-2015

(05-12-2015, 11:17 AM)garvin link Wrote:I understand that a point spread is intended to produce roughly 50 percent betting on one side and 50 percent on the others. But I don't really know what the intent is when somebody is established as, say, a 5-1 shot to be national champion.

I believe it is the casino saying the expect 5x as many people to bet that someone else will be national champion as will bet that this team in particular will be national champion.  So that if these guys win, roughly the pay out will be the same as the losses from all the people who bet on other teams. 

Like in horse racing, the purse should be divided among the winners, minus the small cut the casino (or race track) takes, and hopefully the casino/track hasn't somehow promised more money to the people who win than they take from the people who lose.  If they do, they screwed up somehow (horse racing bets are updated real time as you sit at the track and money is placed).

Re: College football national championship odds: For entertainment purposes only - washingtonismoney - 05-12-2015

(05-12-2015, 10:53 AM)terry link Wrote:The odds are a prediction. To be specific, they're a prediction of how gamblers will bet. That's probably pretty close to a reflection of the consensus prediction for the outcome of the sporting event. But it's not the same thing.

Correct, but here's the wrinkle: the fifty/fifty split should be a pretty good prediction of the actual result. If it weren't, the casino would lose money.

Re: College football national championship odds: For entertainment purposes only - terry - 05-12-2015

(05-12-2015, 11:49 AM)washingtonismoney link Wrote:the fifty/fifty split should be a pretty good prediction of the actual result. If it weren't, the casino would lose money.

Is that right? If the casino correctly predicts the betting, does the actual result matter? It seems to me that if the money comes in 50-50, then regardless of the actual result, the losers will pay the winners, with the casino taking its cut. It seems to me that it shouldn't matter whether the betting line misses the actual result by a little or by a lot, because that shouldn't affect the number of winners or losers.

For example, in Super Bowl III, the Colts were favored over the Jets by 17, I believe. I remember reading that the spread was perfect -- the money came in on both sides; the spread didn't move. So, even though the perception was that the casinos got the spread wrong, they actually got it right because the bets came in 50-50. They made their money even though Namath and the Jets won by 9. Is that wrong?

Re: College football national championship odds: For entertainment purposes only - washingtonismoney - 05-12-2015

(05-12-2015, 12:49 PM)terry link Wrote:Is that right? If the casino correctly predicts the betting, does the actual result matter? It seems to me that if the money comes in 50-50, then regardless of the actual result, the losers will pay the winners, with the casino taking its cut. It seems to me that it shouldn't matter whether the betting line turns out to be close to the actual result or far off the mark, because that shouldn't affect the number of winners or losers.

That's correct. But you need to take the analysis one step further.

Let's imagine casino lines are systematically wrong. That is, the casino's line -- while intended to produce a fifty/fifty betting split -- can be predictably bet against (whether moneyline or spread). Well then, of course, you can and would bet against it. If you could predictably make money in that fashion, you would amass brobdingnagian stacks of capital and unbalance the spreads. That would result in the casinos losing money.

So there's good reason to suspect that casino lines are pretty good guides to the ultimate outcomes to games -- that variation around them is pretty random, for the same reason that stock prices' variation is unpredictable. (Which is why I have my money in index funds.) If variation were predictable, you'd see people destroying the casinos. But we haven't observed either a class of pro gamblers or devastated casinos. We know that sports information is widespread and moves quickly. It's an efficient market! As such, the price signals are generally pretty reliable.

Of course, I'd be willing to change my views if there were reliable empirical research that demonstrating otherwise. I haven't observed that, so based on my priors, I suspect that's not the case.

Re: College football national championship odds: For entertainment purposes only - BostonCard - 05-12-2015

Well, it is also possible (in fact almost certain) that the cut by the casino is large enough that it overcomes any systematic edge.  The odds aren't the true odds of a team winning, they are a payout ratio (in other words, if you bet $1 on Stanford you will get $41 if Stanford wins the National Championship).  By definition the sum of the odds of the field, converted into probabilities, should be equal to 100%, since one and only one team will win.  But if you convert the payout ratio to probability (if the odds are 40 to 1 as for Stanford, the implied probability is 1/(40 + 1) or 2.44%), and sum them up, any excess above 1 will be the Casino's take assuming that the betting comes in inversely proportional to the payout.  I went through the VegasInsider numbers, which has the odds for the top 50 or so teams.  Basically, the sum of the probabilities, excluding "the field" of the top 50 teams is 1.36.  That means that on average, the casino will make a 36+% return (even more, because the tail that wasn't included in my calculation).  Thus, the probability of any team winning is probably about 27% lower than the odds implies.  That gives the casino a fair bit of cushion in case there is some systematic error.  To give you an idea, for Ohio State odds are 15 to 4.  But it's normalized odds are more like 5 to 1.  Put another way, the casino set the odds to try to get 15.4% of the money to come in on Ohio State but it will make money if tOSU wins as long as less than 19.5% of the money is on Ohio State.

BC

Re: College football national championship odds: For entertainment purposes only - BostonCard - 05-12-2015

That's what WIM is trying to say; that the casino's are systematically wrong.  The theory is that certain teams are consistently overrated because their irrational fanbases have ridiculous expectations about how good a team they are going to be and are willing to bet money on it (think Notre Dame or maybe USC, for example).  In something as rare as national championships, I think the numbers are too small to make any meaningful determination (for example, you could argue that over the last 50 years, Stanford has been overrated, since it hasn't won a national championship despite having non-zero odds of winning one each year).  You might be able to do an analysis of whether the spread inherently overrated certain teams over the past decade or so (that would give you over 100 games to use to determine the outcome).  My guess is you might see some deviations from teams going 50/50 against the spread, but that such deviations would be small compared to the house's take.

BC

Re: College football national championship odds: For entertainment purposes only - rudruff - 05-12-2015

I remember a story about sports books offering great odds on the Cubs every year since it would give their fanbase even more reason to hand over their money.

This practice may have tightened up after the Rams won the Super Bowl in '99 at over 100-1.

Re: College football national championship odds: For entertainment purposes only - SUBuddha - 05-12-2015

(05-12-2015, 04:17 PM)ferrari link Wrote:There are no hardcore gamblers here, obviously.
In recovery ferrari...lets just say math and stats were a large part of my life at one time. Let me just say this, at this time in my life i walk into a casino with $200 to spend and my wife holds my card. Too many sucker bets when you bet the long odds and parlays.

Re: College football national championship odds: For entertainment purposes only - HisKneeWasDown - 05-12-2015

Boston Card's math is spot on. The house edge on sports book futures makes Keno look like a game of skill.



Re: College football national championship odds: For entertainment purposes only - Rally - 05-12-2015

The House has an edge in every game or bet, else there wouldn't be a "house."

Re: College football national championship odds: For entertainment purposes only - winflop - 05-12-2015

(05-11-2015, 11:48 PM)Papa John link Wrote:I don't really have much to add, except that Oregon is not winning the NC, because Stanford is taking the Pac-12 North in 2015.

Two thumbs up - WAY UP

Re: College football national championship odds: For entertainment purposes only - winflop - 05-12-2015

(05-12-2015, 11:17 AM)garvin link Wrote:I understand that a point spread is intended to produce roughly 50 percent betting on one side and 50 percent on the others. But I don't really know what the intent is when somebody is established as, say, a 5-1 shot to be national champion.

Casinos can also manipulate the amount you are paid on one side of the bet or the other - it's not always a dollar for dollar payout.  This is often done with individual football & basketball games where there is a point spread.  For baseball it's simply a variance in payout there is no run spread afaik.

Re: College football national championship odds: For entertainment purposes only - BostonCard - 05-12-2015

From the casino's point of view, they need to set the payout high enough to tempt chumps punters into placing bets, but not so high that the payout times the number paid in exceeds what they will collect from the field.  The actual probability of a team winning doesn't matter to the house.

Imagine a case where there are two teams vying for a championship.  Team A is considered the better team, so if the payouts are set even, more money will come in on team A than team B.  So the casino manipulates the odds so that the amount of money coming in exceeds the payout no matter which team wins.  So you might give 1:2 odds to team A (betting $2 gives you $1 additional dollar back, so $3 total), while you give 3:2 odds to team B (betting $2 gives winners an additional 3).  You might get $10,000 bet on team A (which means you would have to pay out $5000 on top of the $10000 if team A wins), so you better have collected more than $5000 worth of bets on team B, in order to make a profit if team A wins.  However, you don't want to get more than $6,666 bet on team B, because if that's the case, the payout if team B wins is over $10,000, which is what you've collected in bets on team A.  If you've set it up perfectly, you collect $10,000 in bets on team A, and $6000 in bets on team B.  If team A wins, then you pay out $5000 (1/2 of $10000), and collect a $1000 profit.  If team B wins, you pay out $9000 (1.5x $6000) and collect a $1000 profit. Thus the house wins either way.

It gets a bit more complicated if there are more than two teams vying for a championship, but the short version is that for each and every team, you want the money coming in to "the field" (the sum of money going into all the other teams) to be greater than the payout if that team wins.  If you set the payouts up perfectly, then you will make the same tidy profit no matter who wins (and it doesn't matter who wins, nor does the underlying probability of who will win matter).  Of course, that never actually happens, so the Casino will adjust the payouts accordingly, giving better payouts to teams that haven't attracted enough money, and worse payouts to those that have attracted too large a share of the betting money.

BC

Speaking of sucker bets.... - Mick - 05-13-2015

I was driving through Delaware and I actually stopped (what was it Jason Sudeikis as Joe Biden said about that place?) for a bit.  I came to realize that they allow sports betting, but they only allow the true sucker bet, which is a minimum of a three-win parley...you have to guess three wins in a row, odds of which are 8:1, but the payout is typically 6:1.  Grand theft, Delaware style.

Re: College football national championship odds: For entertainment purposes only - stupac2 - 05-13-2015

(05-12-2015, 11:57 PM)Boston Card link Wrote:Of course, that never actually happens, so the Casino will adjust the payouts accordingly, giving better payouts to teams that haven't attracted enough money, and worse payouts to those that have attracted too large a share of the betting money.

Right, but WiM's contention is that this adjustment process means that the odds proffered end up being very close to the "wisdom of the crowds" estimate for what the odds actually are. The thing is, though, that this depends on their being both "chumps" (or "homers") who bet on their team no matter what, and "sharks" or people who just want to play the odds and make money. It's not really clear to me that this will balance out into an efficient market (both because I'm sort of skeptical that any market is actually efficient in the real world, except perhaps the largest betting markets, maybe these types of things are big enough but I'm not sure that college game spreads are big enough). That is, the sharks don't necessarily need/want to bet against the homers until the odds are balanced, just until the odds are no longer completely stupid.

So, take a classic homer team like USC. The casino knows that they get a lot of homer bets, so they put they give them artificially high odds knowing that the homers will bet no matter what, but the sharks will only be tempted if the odds are particularly egregious. Where does this balance out? If the market is completely efficient then it'll balance at the true odds, but do we have any particular reason to believe that there's enough shark money to counteract the homer money? I have no idea, and I don't think anyone else does either. The only way to find out (other than opening the Vegas books, which, lol, good luck with that) would be to do a retrospective study to see if certain teams are consistently over-/under-valued, but I'm not sure if even that would do it in terms of this sort of odds (it would work with spreads because there are so many data points, but pre-season championship odds don't have the same amount of information).