Betting on politics: steamers versus drifters
One of the biggest debates in betting is over the merits of “steamers” versus “drifters". Matthew Partridge explains why it's so contentious.
One of the biggest debates in betting is over the merits of "steamers" versus "drifters". Steamers are bets that dramatically shorten in price: so the implied chances of success go up. Drifters are the reverse, bets where the odds drift out, suggesting that a result or event has become less likely. So if a candidate's odds go from 2/1 (33%) to evens (50%), the bet is a steamer; if the odds move in the opposite direction, it's a drifter.
Those who advocate backing steamers argue that most bookies are unable to monitor each individual market. Instead, they tend to rely on the direction of money to guide their odds.While this is designed to protect them from large losses, it means that they are always one step behind the best bettors. In many markets people gamble with information not available to the general public. If there is a rapid movement it makes sense to follow these insiders.
Supporters of drifters agree that this may have been true long ago. But today, the belief that steamers offer value means that many people blindly follow them, betting on them even when the odds are too short. They also argue that people tend to let their emotions run away with them, overreacting to every piece of bad news. They insist that there is better value to be had by betting on drifters.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
So who's right? All the studies suggest that if you're looking to hold a bet until the event takes place, you're far better off going with the drifters. A 2015 study by Tobias Moskowitz of the University of Chicago that looked at Las Vegas bookmakers for baseball, American football, hockey and basketball, found that betting on outcomes where the odds had shortened would have increased your losses. Studies of horse racing by both Betfair and Racing Post also suggest that backing drifters can make you money.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
-
Will the Autumn Budget impact investment markets?
Keir Starmer has warned the Autumn Budget will be “painful”. Will it impact investment markets and should you tweak your portfolio before 30 October?
By Katie Williams Published
-
TSB fined £10.9 million over ‘woeful systems and controls’ for struggling customers
News The Financial Conduct Authority issued the fine for historic failings by TSB after mortgage, loan and credit card customers were treated unfairly
By Marc Shoffman Published