I'm trying to figure out the true odds of a given horse winning a race against other horses. Before a race, odds are posted on a big board: horse A is 2:1, horse B is 5:1, etc. Let's assume these odds are accurate–that is, the betting is spot-on.
The problem is that when you sum these odds they come out to more than 100% Here's a recent race:
Horse A: 6/1 = 14%
Horse B: 9/5 = 36%
Horse C: 5/2 = 29%
Horse D: 4/1 = 20%
Horse E: 9/2 = 18%
Horse F: 8/1 = 11%
Total = 128%
This is due, I think, to the fact that the racetrack takes a cut of the winnings in these "paramutuel" betting systems. Not really concerned with the specifics.
Instead, what I would like to know is, upon picking up the Racing Form in the morning and seeing the data, like the above, how (if, indeed it is possible) I can calculate the true odds (on the assumption that the data given is correct) from the data. It would have to sum to 100%.
Thanks!
Best Answer
If we assume that the odds have been overestimated evenly to account for the racetrack profit cut, the real odds will be proportional (e.g. for Horse A with 14% of a total 128%, real odds would be 10.9375%).