Gambling is a combination of luck and skill. How do we know there is a level of skill involved in bettors’ decisions? Last year, RoyalJeet explored the use of statistical data testing – Student’s t-test, which may help us answer this question. As to whether bettors have forecasting skills and the ability to obtain long-term profit expectations – this test by its nature cannot directly tell us the answer.
It can only calculate the likelihood of a set of profits and losses occurring if only chance comes into play. If the odds are slim, however, statisticians happily take a leap of faith and conclude that it might not be chance that plays a role. Typical benchmark values used in this situation include 5% and 1%. In other words, if the probability of a certain betting record occurring by chance is less than 1%, then we can say that the bettor who appeared in that record may have demonstrated certain skills.
There are countless problems with such bold predictions, not least the problem of survivorship bias: we often only see the best records, but not all the other middling or money-losing records. If there are 100 bettors in a group and the best one has a winning history that is as rare as 1 in 100 – what kind of message is this sending? Unfortunately, we rarely get to see everyone.
What are the chances that a bettor will go bankrupt during a series of bets? This depends on many variables, including the bettor’s own skill (or luck), the duration of the bet, the odds of the bet, and the stake amount. It goes without saying that the more capable a bettor is (the less bad luck he encounters?), the less likely they are to lose their entire bankroll.
We should also understand that the higher the betting odds, the more variable the outcome. When other conditions remain unchanged, the greater the variables, the greater the range of potential profits or losses, the greater the risk, and the probability of bankruptcy will also increase. And it goes without saying that the greater the betting stake as a percentage of the total bankroll, the greater the likelihood of a period of continuous bad luck leading to bankruptcy.
Precisely because there are greater variables, bettors who bet on higher odds will also generally receive a greater proportion of their returns than bettors who bet on lower odds. In other words, equal returns from higher odds are blessed with more luck. This is why horse racing tipsters (who typically bet on higher odds) post higher returns than their sportsbook counterparts (who typically bet on lower odds).
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