# Underdogs and Inefficiencies

## Ford Bohrmann

Odds makers tend to do a fairly good job in sports-- While they may not be perfect, it tends to be tough to find any consistent exploitable inefficiencies. In other words, it is rare that the odds of "Liverpool winning at home", or some other event like that, are consistently over or underestimated. You may think that the odds in an individual game may be incorrect, but in the long run inefficiencies like that rarely persist. Why? Because bookies would lose money on them. If they realize they are starting to lose money, the odds are going to be adjusted to better reflect the probability of each result occuring.

While I am not really interested in betting on soccer myself, odds do provide an interesting estimate of the probability of an outcome occuring. For example, take Arsenal's home game against Chelsea this past year. Bet365 put the odds of an Arsenal victory at 2.38. These decimal odds imply that they expect the probability of an Arsenal victory to be about 42%. Taking in to account that the odds makers usually lower the payouts so that they make money, the adjusted probability of an Arsenal victory is just over 41.1%.

This is all pretty standard stuff. The odds for relatively evenly matched games like the one above are probably pretty accurate, or at least more accurate than your average person. But what about significant underdogs? What about City against Cardiff? These are a little more difficult to assess. It's clear that Cardiff is an underdog in this game, but how much of an underdog? And do odds makers do a good job of assigning implied probabilities to these lopsided games?