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CAES9820 PSA Final Draft
Name: So, Bryan Ching Hin
UID: 3035469750
Subclass: 2EE
Topic: Betting odds in soccer betting: How to perceive them?
Is it really just luck?
Unveiling the mystery of soccer betting systems
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“The final whistle is blown, Germany 0, South Korea 2. The defending champion has been
kicked out of the World Cup in the group stage, while being the favourite...”
This match result has shocked all commentators around the globe. Being one of the
underdogs in the tournament, no one believed that South Korea would defeat the favourite.
This match has once become the talk of the town, even for those who do not watch football.
But how do we know, before the match, Germany is much more likely to win? Of course, we
know Germany is the better team with a higher ranking, but is there any objective criteria to
say it1?
Betting odds, the answer is.
“Betting? Nope!” At first glance, you may not feel related to betting at all, as you may have
not been placed a single bet yet. People often hold the belief that betting is only for gamblers,
none of their business though! However, is it really the case?
The fact is that betting is implicitly incorporated into our daily lives, when you bet on raining
or not tomorrow with your friends, when you play mahjong during the Chinese New Year with
your relatives, or when you buy a $10 Mark-six ticket and wish it will bring you millions of
fortune. It is all betting in fact, but in different forms or types.
Back to soccer betting, is luck the only decisive factor? If not, are there any ways for people
to guarantee a profit? It seems that we don’t have the power to influence match results, but
does it mean that soccer betting is just like head-or-tail?
A method proposed by Dr Vera Hofer and Dr Johannes Leitner in 2016 for the Operations
Research at the University of Graz about the use of statistics in soccer betting market might
satisfy your curiosity2.
But before that, we need to know about the soccer betting market.
An overview - soccer betting market
Soccer bets are cash-or-nothing options, in which the payouts depend on match results. Other
than betting which side to win, in most betting markets there are many other types of bets
on various results of a game.
The market can be divided into two types by the timing of the bet. Normal bets are placed
before the start of a match, while live bets are made in the middle of it. The latter is more
popular among bettors, making up 70% of all trading volume2.
What’s more, soccer betting market adopts the fixed-odds system3. In such, bookmakers
determine and announce the odds for certain outcomes, while bettors place their wagers
according to those odds.
Apart from betting odds, in the soccer betting market all information related to the match,
such as injuries and red cards, is concurrently available for public. Especially for live betting,
those may be helpful for making betting decisions.
How are betting odds determined?
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Undoubtedly, betting odds are essential elements of soccer betting. It can also be said that
the odds are the core of the betting market. Just because of its significance, why can
bookmakers solely determine the betting odds? Does this imply the betting system is unfair
at the root?
Let’s find out the mystery and also the principle of computing betting odds.
Basically, the odds can be separated into two components: bookmaker’s perception and a
positive margin3. It seems abstract at first glance, but actually the concept is pretty simple.
The first one refers to the probability judgement of the bookmaker that the bet is successful,
which may differ among various bookmakers due to subjectivity1.
You may wonder how the judgement would be different. In fact, different bookmakers adopt
varying methods to model team strengths and match predictions4. This results in different
judgement on the likelihood of the same outcome in the same match.
The latter can be interpreted as the proportion of wagers taken out by bookmakers as profits.
It can be treated as expenses and bettors can’t avoid paying it. Just like when you enter
competitions, you have to pay an amount of application or entry fee. They are almost the
same thing.
Now we come to the principle of odds computation. The decimal odds are in fact the
reciprocal of probability judgement of bookmakers adding the margin rate3. Obviously, when
an outcome is highly likely to occur with high probability, its odd would be lower, so as its
payout to bettors. This makes sense with risk-and-return trade-off rule. A higher margin
would also lead to lower odds.
Maybe some of you have already figured out how bookmakers make money. It is the positive
margin that makes bookmakers often win over bettors. In fact, once you place wagers on a
bet, you already lose some money to the bookmaker, regardless of the match results5.
To conclude, your intuition is true: it is never a fair game.
Seeking optimal betting decisions: Implied Symmetry
Why still play in an unfair game when you already know it?
Most bettors lose money, some win. You just need to be the latter.
Hofer and Leitner explain in their research that a new method called “Implied Symmetry” has
been presented2. The concept of this is not complicated at all. What it does is to use relevant
market data to quantify the strengths of every team, followed by running an algorithm to
compute the implied probabilities and odds for every single outcome of all matches.
This method is used to compare with actual betting odds, hence finding relatively cheap bets
and optimal strategies.
Let’s take an example. Imagine you want to buy a pair of shoes and are willing to pay $1000
for it. Before that, you go to different stores for comparing prices. You find out a shop selling
it for $900 only. You would definitely go for it, wouldn’t you?
The principle behind is similar: you would buy something when you think it is worth more
than its market price. We call those goods “cheap” normally. Just like soccer betting, the
“$1000” is our estimation on how much the bet is worth, using the method. Meanwhile, the
“$900” may be the price of the bet some bookmakers are offering. In such circumstances, it
is optimal to buy the bet “cheaply”.
Although those bets are cheap, they do not win certainly. We would still lose money even if
we buy cheap bets. Seems contradicting?
It is a long-term fight, in which bettors have to keep using the method for quite a period of
time. The reason for that is there would seldom be unanticipated match results, and we call
them “surprise”6.
What about “surprise”?
Of course, match results would not be always the same as expected, while sometimes huge
upsets and surprises may be observed. In such matches, most bettors would lose money.
Using the aforementioned World Cup match as an example, South Korea’s victory is already
a big upset, whilst more than 90% bets are on the Germany side. Apart from that, there was
in fact another surprise. All two goals took place in the last five minutes, which were also
totally out of bettors’ expectations. Having no goals in the first 90 minutes, no one would
expect any goals at that time. However, the reverse happened.
Nevertheless, those “surprised” matches seldom take place. In the long term, by using the
method by Hofer and Leitner, there is a high chance that you can take advantage of the
imperfect market prices to earn from buying “cheap” bets2.
Take it smart, take it easy
Soccer betting is always risky and never easy for bettors, not to mention the general public.
Even you have conducted in-depth analyses of all match-relevant information, one ‘surprise’
factor during in-play time can reverse the match result and turn your bets into nothing6.
But does it mean that we should not bet on soccer matches?
It really depends, some people treat it as a way of investment, while some think that it is too
risky. In the meantime, soccer betting can be also considered as a form of entertainment, like
betting on favourable teams to show your support or intuition. Just like the FIFA World Cup,
it does bring people from all over the world together.
Plan your wagers well also. Higher return, higher risks. You should’ve known that. One last
thing to remind, remember not to put all your eggs in one basket!
(Word Count: 1399)
1. Wunderlich F, Memmert D. The Betting Odds Rating System: Using soccer forecasts to
forecast soccer. Plos One. 2018 June [accessed 2019 Feb 3]; 13(6).
2. [Main] Hofer V, Leitner J. Relative pricing of binary options in live soccer betting markets.
Journal of Economic Dynamics and Control. 2017 March [accessed 2019 Jan 30]; 76:66-85.
doi: 10.1016/j.jedc.2016.12.007
3. Patric A, Hakan N. Do bettors correctly perceive odds? three studies of how bettors
interpret betting odds as probabilistic information. Journal of Behavioral Decision Making.
2015 October [accessed 2019 Jan 30]; 28(4):331-346.
=tnh&AN=109305092&site=ehost-live&scope=site. doi: 10.1002/bdm.1851
4. Štrumbelj E. A Comment on the Bias of Probabilities Derived From Betting Odds and Their
Use in Measuring Outcome Uncertainty. Journal of Sports Economics. 2014 January [accessed
2019 Feb 4]; 17(1):12–26.
5. Oikonomidis A, Bruce AC, Johnson JE. Does transparency imply efficiency? The case of the
European soccer betting market. Economics Letters. 2015 January [accessed 2019 Feb 3];
6. Choi D, Hui SK. The role of surprise: understanding overreaction and underreaction to
unanticipated events using in-play soccer betting market. Journal of Economic Behavior &
Organization. 2014 November [accessed 2019 Feb 1]; 107:614-629. https://wwwsciencedirect-com.eproxy.lib.hku.hk/science/article/pii/S0167268114000481.
doi: 10.1016/j.jebo.2014.02.009