Wednesday, October 22, 2008
World Series Betting
The World Series begins tonight, and whoever wins we'll get a fantastic scenario-- the World Series trophy residing in Tampa Bay (!) or Philadelphia fans who are likely to boo the championship parade. Personally, I like Tampa Bay in the matchup-- I think they're just a little better on all margins in the pitching/defense/offense comparison-- but a short series can be won by an inferior team. (St. Louis was far worse than Detroit in 2006 and won the Series in a remarkably easy 5 games.) Anyhow, I'm especially excited to see how Hamels pitches the Tampa Bay lineup this evening.
Nonetheless, I believe there may be something of interest on the betting end of things; at this point, it may be too late to do anything about it, but it struck me this morning as I was driving. Tampa Bay, as you may or may not know, is a young franchise that has been remarkably bad up until this season. Not surprisingly, the general consensus was that Tampa Bay was in for another awful season, so the getting was good on a title bet on Tampa Bay prior to the season, through Spring Training and into the first few weeks of the season. And you don't need to put much money down in order to have a 100-to-1 (or greater) bet become pretty valuable if things shake out your way.
As TPS gambling consultant Rob Holub has let me know (numerous times over the year), the sportsbooks were a bit slow on adjusting their Tampa Bay win-the-World-Series line for the entire season. On May 14, Tampa Bay to win the World Series could have been had at 100-to-1. Tampa's record on May 14 was 23-17, which was slightly pace in terms of the rest of the season-- certainly, the inertia from their franchise history kept the odds very high. And a number of people jumped on board, if for no other reason than to root for Tampa Bay for the rest of the summer.
The problem for the sportsbooks was that Tampa Bay kept on winning. Now there is a large potential payout should the Rays pull it out. This article here talks about the situation, but I think it misses the larger issue. Should you be sitting on a large potential Tampa payout, the risk-minimizing thing to do is to turn your position into a risk-free payout by hedging your bet by betting Philadelphia to win the Series. This is the situation that sportsbooks have to dread-- not that they could be in trouble if Tampa wins (which could well be the case), but that they could have to pay out a large amount of money no matter who ends up winning. Whether Tampa wins or not, I'd be surprised if lines lingered at 100-to-1 or more for any length of time in the future, due to the exact scenario described above.
The interesting part to ponder is exactly what effect this will have on the posted lines for the World Series itself. In years past, the hedging of bets shouldn't have affected (in a large manner) the overall odds on the Series; so long as the hedging is about equal on both sides of the matchup (no reason to believe it would be largely skewed one way or the other in the recent past-- perhaps someone can correct my memory), the line should be a pretty good indicator of the subjective mindset on the outcome of the Series. And, in the long run, this subjective probability should mimic the objective probability pretty closely. (Systematic bias issues aside, of course, though I'm not aware of any within the scope of this situation.) But this year, you could have a large push on one side from people who aren't utilizing any special information to their advantage, just simply improving their position in a risk/reward sense. And this could lead to odds that don't reflect the true public belief of the outcome-- and given an unrestricted gambling market, this is pretty remarkable.
I guess an arbitrage model would have all of those hedges pushed back to the subjective-matching-objective level, but with so much uncertainty in baseball outcomes...should we expect that to happen? On top of that, is volume robust enough to generate the pure market outcome? The latter wouldn't worry me as much as the former; I think if you're a confident handicapper (and nothing outlandish happens over the next few weeks), I think there's a market discrepancy to be taken advantage of. Which, again, spells not good things for the sportsbooks.
Rob, what's your take on this? You follow the lines much closer than I do-- what has the movement on the series line been since it opened late Sunday?