THE STUDY MAY 7, 2012
At the 138th Kentucky Derby yesterday, “I’ll Have Another” outmatched the favorite, “Bodemeister,” for a victory by 1½ lengths. If you bet on him, you were in luck: As the Washington Post notes, I’ll Have Another faced 15-1 odds at racetime. Now, a few of you might bristle at the notion that picking a winner against the odds is merely “luck.” Can research shed any light on the dynamics of odds and wagers?
You bet it can! (OK, sorry.) But seriously: According to a 2008 study, the horse wagering market operates pretty efficiently. Two economists studied the results of Kentucky Derby races from 1920 to 2005, focusing on a variable that measured the experience of horses’ “supporting members”—trainers, breeders, and jockeys. They found that “the odds-making system appears to capture relevant experience,” and that after controlling for it in the odds, experience had no further influence on race results. That finding, in conjunction with others, led the authors to conclude that “no consistent excess return can be generated based on publicly available information.” That means the market is setting prices efficiently: Racetime odds are a fairly accurate reflection of the information that race-watchers have at hand. But it also means that unless you came across a hot tip, your smart pick was probably just dumb luck.