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The Breeders’ Cup Classic — Part 1
Dr. Z’s Mathematics of Gambling
by William Ziemba

The Classic is often the definitive race of the year and this one was no exception. I was at Churchill Downs in Louisville with some of my handicapping friends. As Gambling Times readers know I view horse racing as a financial market. My own Dr. Z systems involve looking at simple markets like the win pool to establish fair odds, and then using these probabilities to look for imperfections in more complex markets such as place, show and exactas. These anomalies provide edges. In our books and articles, Donald Hausch and I explain ways to estimate these advantages and bet wisely on them using the Kelly criterion and its variants. These are mechanical, mathematical systems. They are predicated on the public establishing fair odds in the win market that represent, once corrected for the favorite-longshot bias, the true chance of each horse winning.

On average, the public does a very good job of establishing these odds. Indeed, it takes an expert handicapper to establish superior odds, and this requires a high level of skill.

An innovative methodology developed by Equiform (information at www.equiform.com) provides a unique way to do this, especially for people like me who are too busy to study the races on a daily basis. A unique feature of Equiform is its proprietary internal fraction calculations. These numbers are extraordinarily useful. Just as one inning cannot create a baseball game or one color a painting (except at the Guggenheim), one number, as provided by other handicapping services, is usually inadequate for evaluating the events of an entire race.

During a racing season, a top thoroughbred may run only six to ten times. Less valuable stock may race around thirty times a year. In its entire career, an animal may log only an hour or so of actual racing time. As an analogy, a single race might equate to one or two years on the job for a human being working 40 years. During an entire career, humans have good years and bad years, or in the financial markets, great minutes and horrible minutes. Generally, one year of performance does not give a complete picture of one’s abilities. And yet in racing, one number is often used to judge a critical minute or two in the life of a thoroughbred. Equiform has long viewed this as a shortsighted approach.

Recognizing the importance of the internal fraction calculations, and interpreting how they predict a horse’s likely performance are Equiform’s distinguishing features. The relatively minimal amount of real racing time a horse accumulates makes every part of the race important. Equiform’s research has shown that valuable insights are gained when specific segments of a race (the race within the race) are analyzed. Under-standing this information provides a much more accurate gauge of a horse’s current condition than can be gleaned from the usual fractions in other publications. These internal numbers paint a more complete picture of a horse’s racing experience.

Next month, I will look at the Equiform numbers for the main contenders in the 2000 Breeders’ Cup Classic and explain some basic principles that will allow the handicapper to more accurately predict performance, and thus establish superior win probabilities.

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