How Betting Markets Get Overvalued

Sports gambling is all about the odds; they are the thing that determines if a bet is a justifiable one or a pass. We have written an entire article explaining how bookmakers set theirs, and we have published another on value-betting tactics or exploiting poorly placed bookie coefficients. Here, we will examine how markets get overvalued and why online sportsbooks make mistakes when pricing them. This happens when they do not accurately reflect the probability of something occurring on the pitch, field, court, or whatever. Identifying these mistakes is one of the main things that separates experienced bettors from novices.

Suppose a bookie gives even money on something; that indicates a fifty-fifty probability of something happening. Such odds are overvalued when they do not represent reality – the actual likelihood of something occurring. They are a product of a distorted reality, a crooked perception that the party setting the odds has. Bettors who do not take advantage of such openings are not seizing the moment, and not doing that will erode their bankroll over time.

Here, we look to give you a few signs that will help you spot or avoid overvalued odds. This will allow you to focus on more profitable sports gambling opportunities. By remembering and incorporating these tips, we are sure that you can have more success in your betting adventures, as you will have developed a better—or should we say, sharper—eye for market and odd inefficiencies.

Public Action/Sentiment Skewing Odds

We have also covered this in a detailed guide that goes into how public sentiment can drive odds. So, if this interests you, we suggest you check that piece of content out, as we will briefly touch upon this topic here.

Public betting trends shape odds as sportsbooks have to adjust them to manage their exposure when significant wagering comes in on a market or side. That adjusts the odds in one direction. An example of this is something happening and getting heavily talked about in the public, which causes, let us say – dramatic betting on the Lakers in their upcoming duel against the Knicks. Due to the sheer number of fans backing them, the odds sway dramatically in their favor, creating the discussed inefficiencies arising due to crafted perceptions, emotional factors, and the like.

Misinterpretation of Recent Performance

In psychology, this is called recency bias, and it is a cognitive one where we select to favor fresher results more than historical ones. In other words, we, as humans, tend to put more weight on recent events as we have a better recollection of them. The sports betting sphere is not immune to this either, and this is one of the most common mistakes that bettors and bookmakers make.

Without question, teams/players on a winning streak attract more betting action, as the assumption is that their streak will go on. Aware of this tendency, sportsbooks may adjust the odds. To illustrate this, let us say that a tennis player unexpectedly wins a Grand Slam. His odds for the next big competition will probably reflect an inflated perception of his ability. This is where something called regression to the mean comes in, which is a concept that notes that a player showing uncharacteristically positive performance is more likely to return to his average than keep playing at a higher level than what fans have gotten accustomed to seeing from him.

Ignoring Contextual Factors

Let us go back to the example above – the one about the lower-ranked tennis player winning a Grand Slam. The odds he gets for the tournament following the Grand Slam may not reflect his true probability because bookies ignore the factors contributing to his unlikely win. Fans may also neglect them, leading to unreasonable betting action.

Context should shape odds, but most of the time, people do not look that deeply. Hence, many may ignore the circumstances that led to a specific outcome, such as injuries, weather conditions, court state, and so on. In the NBA, a favorite may underperform, but the context of their most recent loss may be due to them playing back-to-back games. Therefore, it is vital not to take anything at face value but to look at everything leading up to an event more deeply.

Misleading Statistical Narratives

Stats are a super handy tool for analysis. But here is a kicker – stats can lie. They can. They can lead gamblers astray. For instance, a soccer/football team may have a high-scoring record, and this may leave an impression on bookies that they will score at least two goals in their upcoming match, creating odds that reflect this. However, the team may have built this record against weaker squads with defensive liabilities. So, when they face a defensively sound opponent, their high-scoring average may mean little.

The strength of the schedule is an essential contextual factor, and it can easily create misleading statistical narratives if a stronger team is lined up to face weaker opposition for a distinct period. This is what we call the illusion of small sample sizes. That is why it is crucial that everyone focuses on match-up-specific metrics and advanced analytics.

Overvaluation Due to Historical Reputation

Brazil has won the FIFA World Cup five times. That is more than anyone. But the reality is that even though Brazil has a terrific reputation in the football sphere, the last time they went all the way was in 2002, and they got eliminated in the quarter-finals in the past two World Cups. Consequently, they are not the force they once were. Nevertheless, people still believe they have a good chance of winning, regardless of past results, due to the reputation Brazil has attained as a footballing nation. Accordingly, they are more likely to get more credit than they should. This is not to bag on Brazil, but we are just using them as an illustrative example.

The same overvaluation happens with aging superstars and historically dominant franchises, such as the Dallas Cowboys, to name one. Always put form over fame, ignore power brands, and focus on current realities. That is what we say.

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