Why There’s Value in the Underdog

Last night, the University of Florida won the men’s collegiate basketball championship, beating UCLA, 73-57.

The Florida Gators were the favored squad, and, as usual in this type of spectacle, most of the money on the contest was bet on the favorite, the team that’s perceived as stronger than the other one. Everybody loves a winner — particularly the betting public, which usually likes to support teams that are supposed to win more often than not. Since the people who set the odds are acutely aware of this phenomenon, the pointspread (or “line”) is generally skewed slightly upward, effectively charging the betting public a small premium to bet on their favorite teams. If the favored team is a media darling, the skewing effect can be even more dramatic. A team that should be, say, a 4-point favorite, will be offered on the wagering market as a 6.5 point favorite. The extra 2.5 point may seem like a trifle in the short run — a mere free throw or two — but in the long run, the realm where sharp bettors do their calculations, the extra points are worth a substantial percentage.

This is why there’s often value in betting on the underdog. Heavy with favorite money, bookies and Las Vegas casino sports books are usually rooting for the underdog. By wagering on the disfavored squad, the one that’s supposed to lose more often than not, bettors in effect are siding with the house. And in most gambling endeavors, we know who ends up with the money.

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