%0 Journal Article
%T Adjusting BookmakerĄ¯s Odds to Allow for Overround
%J -
%D 2017
%X Several methods have been proposed to adjust bookmakersĄ¯ implied probabilities, including an additive model, a normalization model, and an iterative method proposed by Shin. These approaches have one or more defects: the additive model can give negative adjusted probabilities, normalization does not account for favorite long-shot bias, and both the normalization and Shin approaches can produce bookmaker probabilities greater than 1 when applied in reverse. Moreover, it is shown that the Shin and additive methods are equivalent for races with two competitors. Vovk and Zhadanov (2009) and Clarke (2016) suggested a power method, where the implied probabilities are raised to a fixed power, which never produces bookmaker or fair probabilities outside the 0-1 range and allows for the favorite long-shot bias. This paper describes and applies the methods to three large bookmaker datasets, each in a different sport, and shows that the power method universally outperforms the multiplicative method and outperforms or is comparable to the Shin method.
%K Adjusting Forecasts
%K Betting
%K Sports Forecasting
%K Probability Forecasting
%U http://www.sciencepublishinggroup.com/journal/paperinfo?journalid=155&doi=10.11648/j.ajss.20170506.12