In betting models, the price offered by the market is often ignored until the end. However, it seems like the price is a valuable piece of information that cannot be overlooked. Consider a hypothetical 2-horse race that pays double or nothing. Suppose that the market odds (X) and my model predictions (Y) are correlated, as shown in the following table:

|           |       X       |
|           +-------+-------+
|           | wrong | right |
|   | wrong |  1/4  |  1/8  |
| Y +-------+-------+-------+
|   | right |  1/8  |  1/2  |

I should bet when my model and the market agree. However, when the models agree, the market's price matches my prediction, and therefore, I don't bet in that case. Instead I only place a bet when my model disagrees with the market. It would be more beneficial to include the market price as an input to my model. I am curious to know whether this approach is widely used or if there is a better way to address this issue in betting models.

  • $\begingroup$ Hi: Welcome to this SE. my guess is that it is not clear to people reading above how "market odds" can be right or wrong ? $\endgroup$
    – mark leeds
    Mar 7 at 20:05


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