A story about how a winning streak can fool and lead to a mispricing of risk.

Rare as apples 

When I was a young lad I remember holding an apple and wondering, in one of my more philosophical moments, how remote the chances were that I should be holding this particular apple.  It was a French apple and I began imagining all the apples in all the orchards in France.  This single apple was picked, packed and journeyed across the Channel.  It was then passed to one of many distributors and sold to one of a thousand shops selling a million apples.  What are the chances, I pondered, of seeing that apple on a tree in the orchard and then it landing in my hand days later.  I didn’t really know the chances of course, I just knew they were remote.  I also understood that since I had an apple in my hand, one apple from one orchard was always going to make that identical journey just as I had imagined it. 
Continued

The emergence of betting exchanges has allowed the public to keep a greater share of betting turnover and allowed a knowledge of sports betting markets to be rewarded. In this post I also cover the concept of value betting and probabilities.

Chance and probabilty

All us punters have one thing in common. We are all trying to beat the bookie. Or, with the emergence of betting exchanges, the guy on the other side of the bet. For the average punter betting is just entertainment, a few quid on a Saturday at the bookies or between friends in the pub. A detailed assessment of the likely outcome is given only moderate consideration. The entertainment is most often in making the bet and the excitement of having a few quid on whilst watching the event. Collecting the winnings of course also has its pleasures!
Continued

Not a great weekend of games for the fund to say the least, losing some 22%.  Whilst I knew that one week would see a big fall I did not expect it to be due to a poor strike rate.  I had thought it would more likely come from laying a long shot.  I would hate to see a week with a low strike rate and a long shot coming in against me.

This weekend there were only 3 winning bets and 5 losing bets with 2 draws.  The strike rate of winning match bets moved down to 67% and the yield (return on money at risk) fell to 6.1%.  These figures are around the long run expected values so the fund has really just fallen from unsustainable highs back to its long term trend.

I saw the Liverpool v Man U match and it was my impression that Liverpool had most of the play.  Whilst the Man U goal was a well worked set piece they threatened little during the game.  This apparent divergence between the result and game performance does level out over the season.  That is, sometimes the luck (or ‘white noise’) goes for you and sometimes against.  And as long as it does cancel itself out over time it should not stop the fund growing in value.  The rather nasty looking stats for this week are below:

PERFORMANCE OF ALGORITHM BETTING PREMIER LEAGUE FUNDS:

Weekly movement in fund: Alpha -2.2%, Beta -21.9%

Winning weeks (number of weeks showing gains/ total number of weeks since fund started): Alpha 13/17, Beta 9/10

% increase since the fund started: Alpha +35.0%, Beta +129.8%

Risk (max weekly gain/max weekly loss, insufficient data for standard deviations):

Alpha +6.9%/-2.9%, Beta +49.6%/-21.9%