Sunday, October 28, 2007

Futures vs. Game Odds


4 G 5 G 6 G 7 G
Rockies


.023
Red Sox .545 .242 .141 .049

The 2007 World Series makes for a good case study in how betting markets perceive futures bets vs. individual game bets. In general, you're going to see more efficient lines for single games than futures, because single games attract more action, which tends to move the line to a more accurate spot. In contrast, many futures bettors are the stereotypical "squares" betting on the hometown nine to win it all, leading sportsbooks to shade the lines against popular teams like the Yankees and Cubs.

This year's World Series was particularly interesting because it pitted an obviously superior Boston squad against an underdog that had as much "momentum*" as any team ever. This type of situation is likely to lead to squares betting on the winning streak to continue. In other words, we'd expect the Red Sox to be a lesser favorite for the Series than they would be against a team that was just as talented as the Rockies but didn't begin the Series on a big winning streak.

Indeed, the Series line closed at a market price of roughly Rockies +210/Red Sox -210. For those of you not familiar with money lines, that means the Rockies are expected to win the World Series 100 / (210 + 100) = 32.3% of the time.

The individual game lines, which should be a more accurate portrayal of each team's odds to win, closed at roughly:

Game 1: Rockies +205 (32.8%)
Game 2: Rockies +190 (34.5%)
Game 3: Rockies +130 (43.5%)
Game 4: Rockies +130 (43.5%)

The numbers in parentheses indicate the expected chances for the Rockies to win each game based on the closing money line. Since Games 5-7 feature the same pitching matchups as Games 1-3, we can estimate the money lines by extrapolation, with slight changes for the DH and home-field advantage:

Game 5: Rockies +125 (44.4%)
Game 6: Rockies +190 (34.5%)
Game 7: Rockies +210 (32.3%)

Given these individual game percentages, we can calculate the chances of the Rockies winning the Series--using the same method I did to come up with my pre-WS estimate. It comes to...

24.9%.

The Rockies, based on the bookie's own lines, should have been 3-1 dogs. Instead they were going off at almost 2-1.

I leave it to the reader to interpret this result, but it sure looks like the bookies knew they would get plenty of money on Colorado without offering a big price, and then laughed all the way to the bank.

* - The quote marks indicate that I do not agree with the media definition of the word "momentum" in sports. In physics, momentum does not magically switch from one direction to another, back and forth.

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