What causes rapid changes in price as racetime approaches?

Mar 2nd, 2012 - Posted by Stephen_Harris in Betting Theory, Horse Racing

Racing Editor for bettingexpert. Always searching for winners "against the crowd" and trying to find the value.

Email : stephen at bettingexpert.com

Why do we often see such sudden movements in the odds as racetime approaches? What or who is responsible for these shifts in price? Today on the blog, Stephen offers us some answers to such complicated and perplexing questions.

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Who are "They"? What causes such rapid drifts and collapses in price near the off? How do "They" always seem to predict what is going to happen?

These questions are frequently raised by punters, often by those with many years of experience in the horse racing game, as they struggle to understand the causes of such incredible fluctuations close to the off time in so many of our horse races on a daily basis. Here we analyse some possible explanations.

1- Show your cards time

Although the betting exchanges are open from the previous evening for every horse race every day, the actual sums traded are miniscule up to around ten minutes before the off time. Often the actual markets have been "seeded" by the exchanges themselves to give the impression of depth in the prices, when in fact none exists. It is very hard, away from the higher level races at least, to get any sizable bet matched unless you are willing to accept a lesser and lesser price. Therefore the surviving educated punters who have stood the test of time now wait until much closer the off before "showing their cards" and placing the substancial bets that cause inward and outward movement in prices. Because the original tissue is so weak and not gathered from inspired brains who follow the form and have many contacts, the movement in prices is rapid as the market "corrects" itself. At the off time, as analysis of the betfair SP proves, the prices are as near to "perfect" as is possible in a sport with a number of variables. i.e a 6-4 chance will actual win very close to 40% of the races.

2- Corruption is revealed

Some cynics believe that the contraction in prices and more pertinently wild drifts close to the off signal exactly what is trying and what isn't. While corruption has certainly occurred on a number of occasions, especially on the low grade all-weather racing, this is an overstated view and does little to help the punters quest for profitability long term. More often the drifts mirror doubts, i.e the ground has eased and the horse is unproven on the soft or there has been a minor niggling setback in a training regime.

Here are two recent examples where the drift had explanations rather than any criminal activity. They are pertinent because one went on to win while the other finished tailed off.

a) Lingfield 23-2-12 VAL MONDO drifted rapidly to 9-2 from 5-2 - Result tailed off. Venetia Williams charge had been a solid 5-2f all day for this very modest handicap, after an excellent second in a better Taunton contest on his latest start, but as timeform reported he "was surprisingly easy to back and ran no sort of race, beaten in a matter of strides as things started to pan out fully after the third last; something may have been amiss and it's too soon to be writing off his chance in handicaps." The conspiracy theorists were out in force on Twitter and the forums, but anyone watching Lingfield that day could see that the runners were finishing legless and the ground riding extremely dead and testing. His previous form had been at the speed test course of Taunton (on decent ground) and perhaps the layers felt he was underpriced as he was unproven given such a war of attrition. Whatever the reason "they" got the money.

b) Kempton 25-2-12 CRISTAL B0NUS 25-2-12 drifted to 15-8jf from 5-4 - Result Won readily. Paul Nicholls well regarded type had appeared a top class prospect when winning on chase debut but proved very uneasy on the exchanges pre-race, drifting out to around 9-4 as support came for his two main rivals. He made all and won easily but after the race trainer Paul Nicholls revealed he had been very difficult to train and intermittently lame in the run-up to his latest race. Perhaps the "layers" were privy to such information and thought he was underpriced as a result of these problems (the yard also had widely documented coughing troubles of late). Either way "they" lost the cash on this occasion.

3- Well executed gambles

The more astute connections realise that better value is to be had if they wait until as close to the off before supporting their horses. Liquidity is plentiful and they can easily get sizable sums on. In the past, morning gambles with conventional layers were self defeating in that they gave the game away for very small money and effectively informed the entire betting industry that today was the day. Snowball early gambles caused prices to crash as every firm copied the other, especially when the stable had a reputation of plotting up horses to land coups, i.e Barney Curley and Noel Quinlan.

Patience can now reap dividends with connections getting inflated prices (as uneducated punters believe they are not fancied today and offer bigger and bigger prices, if they can resist temptation until close to the off.

4- Trading and Mythical Moves

The compression of prices, especially with favourites, can be deliberate manipulation by traders trying to grind out profits regardless of the outcome of the race. If playing in huge size they can generate momentum in a price either inwards or outwards by putting up bets apparently waiting to be matched in order to arb out a profit. Guessing out the direction in which a horses price is moving is a craft that can be very rewarding if the trader is adept. However many perish as they turn to gambling i.e having a big position, when the market moves against them, rather than cutting losses and accepting an error of judgement has occurred.

These price movements have very little bearing on the prospects a particular horse has of winning, but can add fuel to the fire of conspiracy theorists when something wins at an extremely short price, directly as a result of traders trying to join in the momentum downwards.

More manipulation can occur when an apparent morning springer i.e 33-1 into 12-1, then drift wildly out when the off time nears. These mythical plunges are often used to deflect attention away from where the real money is going later on.

5- Certain yards are better than others

"They" are certainly more astute when from certain smaller yards than with others. The bigger stables with a huge number of horses tend to have fewer secrets and run there horses in the better races. Large numbers of people are connected to these yards and the price available tends to be an accurate guide as to what is expected. Very often high profile connections lead to overbet and underpriced horses. Jeremy Noseda is a classic example of this, with some beautifully bred well regarded youngsters owned by big names in the industry. There is usually a deluge of cash for anything that is fancied, while the drifters often ease rapidly if they are not held in much regard. At the other end of the scale, many of the Welsh yards with relatively smaller strings i.e David Rees, Evan Williams, are running at a lower end of the prize money spectrum and the betting exchanges can be an incredibly accurate guide as to what is expected. This is probably because owners with runners with certain stables are in the game for a love of a gamble (that they need to land to pay the training fees), rather than trying to win Group races or have a day out at Royal Ascot.

More astute punters need to be aware of what money for some yards means in relation to others, and when it is safe to support a very uneasy selection with confidence (or otherwise.)

6- The "Invisible hand"

The purists view held by economists who believe that where supply meets demand will equal the perfect "correct" price. Adam Smith's idea of an "invisible" hand that guides all the players in an exchange to a happy medium (an agreed price where both are happy to trade). This theory does explain why the betting is such an accurate guide, and why overall the prices at the off are "right" over a long period of time. However, it is the understanding of how these prices are reached and what they mean that the punter has to understand if he is to win long term. If he can regularly beat the final price at the off he will become part of the group that the uninformed label "They".

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