One of the oldest findings in betting research is also one of the most useful: longshots are overpriced, and favourites are slightly underpriced. It's called the favourite–longshot bias, and it shows up in horse racing, sports betting and prediction markets alike.
The evidence
Economists have studied millions of horse races. Bettors who back heavy favourites lose a little on average; bettors who back huge longshots lose a lot. One influential study by Erik Snowberg and Justin Wolfers found that the bias is best explained by bettors misjudging small probabilities — treating a 1% chance as if it were bigger.[1]
| Type of bet | Typical average loss |
|---|---|
| Heavy favourites | Small |
| Mid-priced runners | Moderate |
| Big longshots | Large |
(Exact figures vary by market and era; the pattern is consistent.)
Why we overpay for longshots
- The thrill: turning $5 into $250 is more exciting than turning $50 into $70.
- Memory: we remember the 50/1 winner we backed, not the forty that lost.
- Probability blindness: humans struggle to tell 2% from 5% — both feel like "could happen".
- Bookmakers know it: they build bigger margins into longshot prices.
Where it shows up today
- Futures: preseason "win the Super Bowl" prices on longshots carry huge margins.
- Parlays: a long parlay is, in effect, a manufactured longshot — see why parlays are so popular.
- Props: "anytime touchdown" on a backup tight end, first goalscorer markets.
- Prediction markets: cheap contracts on unlikely events — see implied probability.
What to do with it
Keep longshot bets as small, fun extras. Check the margin with the no-vig calculator, and remember that value can exist at any price — it's just rarer at the long end. See value betting.
Sources
- Explaining the favorite–longshot bias — Snowberg & Wolfers, Journal of Political Economy, 2010 ↩
