* - Yes, that's really his name: https://en.wikipedia.org/wiki/Chris_Moneymaker
It seemed like bookies really did adjust their expectations or their risk appetite for long-tail events in this market. And they were probably correct to do so.
I'm not much into betting, but will not the odds change also based on how people are betting. So if many people started to bet on the unexpected result, due to for example that the unexpected Leicester team won last time, wouldn't odds tighten up automatically?
Yes IMO. It might be more rigorous to say: before 2016 there were always a handful of teams priced at 5000-1, after 2016 there were not. The league didn't objectively get more competitive.
> So if many people started to bet on the unexpected result, due to for example that the unexpected Leicester team won last time, wouldn't odds tighten up automatically
Definitely possible, and would explain the effect regardless of whether the punters were smart money Nicholas Taleb types who spotted that black swans were systematically underpriced, or gamblers dreaming of another Leicester payday.
A bookie isn't trying to gamble on the outcome; they're trying to get the bets to all balance out so that no matter what the outcome they take in enough money from the losers to pay the winners with some profit leftover.
As more people bet on a specific outcome, they will lower the odds to make sure that the pool of money taken in is still big enough to pay out if that outcome happens.
Concentrated downside, distributed upside. I doubt the individual bookie is happy.
It seems, like in other industries, being large helps to weather out such rare events.
It’s not mentioned in the movie. I have to guess that they only do that if there is a large bet pending, rather doing it to all the long shot horses.
Some gambler dropping a 10k bet, and have her put $1k on the horse is enough to really rock the odds. Perhaps, mob accounting is not my specialty. And, of course, it’s just a movie.