In recent years, the federal government has taken various actions to make it harder to bet on sports over the internet.
That’s lucky for me, because when I used to bet on football, one of the key pieces of information I used was whether or not a team was a home underdog. For whatever reason, bettors don’t like to bet on home underdogs.
Recognizing this, bookies shade the point spreads toward the home underdogs. Because of the bettor bias, the bookies can set spreads so that home underdogs cover the spread more than half the time, but attract less than half the betting dollars. According to my estimates, home underdogs covered the spread almost 54 percent of the time over a 20-year period, but they still only attracted about 40 percent of the betting dollars in those games. As a consequence, these games are extremely profitable for the bookies: most of the money goes on the visiting favorite, who manages to cover the spread only 46 percent of the time. (For more on this, see an academic article I wrote on the subject.)
Even after I published that paper, the home-underdog bias remained alive and well. I nearly won an 800-person handicapping contest doing little more than picking home underdogs.
The last two years, however, have not been so kind to home underdogs. According to calculations made by Charles Monteleone, a graduate student at the Booth School of Business here at the University Chicago, home underdogs had a 44-45-1 record against the spread in 2007. That is not so bad, but it’s far from the historic performance. The real outlier was the 2008 season, during which home underdogs had a record against the spread of only 32-45-2!
Why this radical reversal? One possibility is that bettors finally caught on to the fact that home underdogs were a bargain, which in turn led the bookies to alter spreads so that they no longer favor the home underdogs. I think there is almost no chance that this is the correct explanation. Bettors have failed to recognize this bias for 20 years; there is no way gambling patterns could suddenly change this quickly.
The real explanation, I suspect, is that it was just bad luck — bad luck for the minority of bettors who play the home underdogs, but especially bad luck for the bookies. I wouldn’t be surprised if the poor performance of home underdogs destroyed a large chunk of the total profits for the bookmakers on the N.F.L. this year.
Home underdogs are of particular interest right now because, remarkably, in all four playoff games this weekend, the home team is the underdog. If I were a betting man (or more accurately, if I had an account I could bet on), I would be hammering the home underdogs this weekend.
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The academic article that Levitt published and cited is absurd. The data set is from a promotional contest in which all of the entry fees went back in prizes. It was essentially just a big office pool. That is not bookmaking at all. The bookmaker could have assigned spreads randomly without any cost.
@Bill Gattis — It is very hard to repatriate sports gambling winnings these days.
I work at the Board of Trade and I’ll tell you that the guys who used to run books in the 80′s and early 90′s are back making a very sizable market. Make your way down to LaSalle St. Mr. Levitt.
“for whatever reason, bettors don’t like to bet on home underdogs”- well, why the distinction?- do bettors like to bet on away underdogs?!- I doubt it- you may coldly and rationally decide that the spread against the lions is too large, but as mickeyrad alludes to, actually laying a bet on the detroit lions is going to well up a bitter taste in most mouths, home or away
A lot of what we see is just luck or an oddity. People seem to think that the natural consequence is always symmetry. But symmetry is only possibility, and the odds of symmetry always happening are very low.
Like you showed with Kansas City that year, if a sports team goes fifteen games without a win, it’s probably just a below average .300 typical sports team hitting a bad luck spell.
John M.-
Great point. The setup described in the article does not fit the traditional pattern of how and why lines are set and the line-setter’s role and function in the process. What is even more ironic is that it is described in detail earlier in the article and then completely disregarded.
Also, let’s look at sample-size. Levitt sites 20 years of data demonstrating this phenomenon and than points to two years in which it does not hold true as evidence that the pattern does not hold. Who’s say to this isn’t just a minor blip in the data based on a small sample-size?
While Levitt’s observation that home underdogs are underbet is interesting and perhaps useful in sports betting, his contention that, absent other information, all four NFL games this weekend feature home underdogs and therefore represent good betting opportunities is flawed.
Let us grant him the long-term finding that bettors inefficiently select visiting favorites– does it apply in these four games? Aaron Schatz’s useful DVOA statistics found at Football Outsiders illustrates that the home teams deserves their underdog status. Let’s break down some simple stats, however, that illustrate that these home teams have EARNED their ‘dog status.
ATL (-2) at ARI:
ATL: 11-5; ARI: 9-7.
ATL won two more games than ARI.
ATL played in the tough NFL South, where no team finished with a losing record. The teams in that division won 70% of their non-divisional games.
ARI played in the absurdly weak NFC West, where the other three teams won just one quarter of their non-divisional games. To give ARI some credit, however, they do play better at home.
IND (-1) AT SD:
IND: 12-4; SD: 8-8.
IND played in the strong AFC South, which won 65% of their non-divisional games. They won 4 more games than SD, which played in the laughable AFC West, in which none of the teams finished with a winning record. The AFC West collectively won 28% of their non-divisional games.
BAL (-3.5) at MIA:
BAL: 11-5; MIA: 11-5.
BAL played in the middling AFC North, which won about 50% of their non-divisional games. However, the divisions that they played this year (outside of their own) were the AFC South and the NFC East, two difficult divisions this year. As stated before, the AFC South won 65% of their non-divisional games, and the NFC East too won 65% of their non-divisional games. The NFC East also had no team in their division finish with a losing record for the second consecutive year. This is a tough division to play.
MIA and the rest of the AFC East, however, played the two weakest divisions this year: the AFC West and the NFC West. So while they finished with identical records, MIA and BAL had extremely different paths. It is obvious that BAL is the stronger of the two teams.
PHI (-3.0) at MIN:
PHI: 9-6-1; MIN: 10-6.
PHI is probably the least deserving favorite. Not only did MIN win more games, but they are playing at home. MIN, however, played in the NFC North, which, led by Detroit, won less than one-third of their non-divisional games. As stated earlier, PHI’s division, the NFC East, won almost two-thirds of their non-divisional games. Nevertheless, I suspect the line on Philadelphia is more due to bettor enthusiasm for the team rather than objective analysis.
Cogent football analysis: saframetrx.com.
How can so many people have written so many comments about this year’s NFL playoffs and NOT have called out the oddity that five of the six playoff teams in the NFC have an “a” at the end of their city/state names?!? (Atlanta, Arizona, Carolina, Minnesota, and Philadelphia, leaving only New York on the outside, looking in). How crazy is that?! You may be saying, “So what?” but consider this: of the 16 teams in the NFC, only 5 of them are so endowed! (Green Bay and Tampa Bay almost make it in, on a technicality, but no!) In other words, this year we MAXIMIZED the number of “a-ending” teams in the postseason, despite a set of odds being heavilty stacked against them!
Who’d have bet on THAT happening, I wonder?
Another important note regarding the setting of lines:
Americans (and maybe everyone) loves betting on the favorite. This is known by oddsmakers and, therefore, spreads are usually bumped up .5 to 1 points when they are opened because they know that most casual and/or uninformed betters will take the favorite.
By the way, even if you were to hit 54% of the time by picking home dogs, you’d still break even. Bookies and Vegas generally take 10% of all bets, so you usually need to hit at least 55% of bets to break even.