Favourite–longshot bias: Definition and Formula | CONSENSUS

Favourite–longshot bias

Favourite–longshot bias — the tendency for longshots to be overpriced relative to their true chances, and favourites underpriced.

By CONSENSUS Research Published Updated

Observed across betting markets for decades: bets at long odds return less than their implied probability suggests, while short prices return more. The effect is strongest at extreme odds.

Why it matters: it means margin is not distributed evenly across a market, which is why proportional de-vigging systematically misprices longshots.

Common mistake: concluding that backing favourites is automatically profitable. The bias reduces the disadvantage at short prices; it rarely reverses it.

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