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An Application of Expert Information to Win Betting on the Kentucky Derby, 1981—2005

In: Sports Analytics

Author

Listed:
  • RODERICK S. BAIN
  • DONALD B. HAUSCH
  • WILLIAM T. ZIEMBA

Abstract

The Kentucky Derby features top three-year-old thoroughbred horses. Run at 114 miles, it is typically at least 1/8 mile longer than any of the horses has raced before. This extra distance, combined with a large field, makes the race a difficult test of stamina for horses this young. Bettors, because there is no direct evidence of whether a horse has the stamina to compete effectively at 114 miles, are also challenged. The informational content of one publicly available, pedigree-based measure of stamina, the Dosage Index, is used with simple performance measures to identify a semi-strong-form inefficiency, and to create a betting scheme based on the optimal capital growth model that merges these criteria with the public’s opinion. Statistically significant profits, net of transaction costs, could have been achieved during the period 1981 to 2005.

Suggested Citation

  • Roderick S. Bain & Donald B. Hausch & William T. Ziemba, 2022. "An Application of Expert Information to Win Betting on the Kentucky Derby, 1981—2005," World Scientific Book Chapters, in: Sports Analytics, chapter 18, pages 283-301, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811250217_0018
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    More about this item

    Keywords

    Sports Analytics; Statistical Analysis of Sports Decisions; NFL Football; Thoroughbred Racing; Basketball; Baseball; Hockey; Jai Alai; Optimal Betting Strategies; Mean Reversion Risk; Arbitrage; Decision Strategies by Coaches;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z2 - Other Special Topics - - Sports Economics
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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