Building Simple Margin Predictors

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Having a new - and, it seems, generally superior - way to calculate Bookmaker Implicit Probabilities is like having a new toy to play with. Most recently I've been using it to create a family of simple Margin Predictors, each optimised in a different way.
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Using Risk-Equalising Probabilities for the Margin Predictors

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With the exception of Combo_NN_2, all of the Margin Predictors rely on an algorithm that takes Bookmaker Implicit Probabilities as an input in some form: 

  • Bookie_3 and Bookie_9 use Bookmaker Implicit Probabilities directly
  • ProPred_3 and ProPred_7 use the outputs of the ProPred algorithm, which uses a log transform of Bookmaker Implicit Probabilities as one input
  • WinPred_3 and WinPred_7 use the outputs of the WinPred algorithm, which also uses a log transform of Bookmaker Implicit Probabilities as one input
  • H2H_U3, H2H_U10, H2H_A3 and H2H_A7 use the outputs of the Head-to-Head algorithm, which uses Bookmaker Implicit Probabilities as one input
  • Combo_7 uses Bookmaker Implicit Probabilities directly as well as via its use of the outputs of the Head-to-Head Algorithm
  • Combo_NN_2 uses Bookmaker Implicit Probabilities directly as well as via its use of the outputs of the ProPred, WinPred and H2H algorithms

For this short blog I've switched, in all of the underlying algorithms, the Implicit Probabilities calculated using the Risk-Equalising Approach as replacements for those calculated using the Overround-Equalising Approach and then compared the resulting MAPEs for seasons 2007 to 2012 for all the Margin Predictors.

Overall, all Margin Predictors except Bookie_3 benefit from the switch, however modestly. Bookie_9, which now will serve as a co-predictor in the MAFL Margin Fund, benefits most, knocking over one quarter of a point per game off its MAPE.

The uniformity of these improvements is made slightly more remarkable by the realisation that the Margin Predictors, built using Eureqa, were optimised for the probability outputs of the underlying algorithms when those algorithms were using Overround-Equalising Implicit Probabilities. So, for example, the equation for Bookie_9, which is:

Predicted Home Team Margin = 2.2205129 + 17.729506 * ln(Home Team Bookmaker Probability/(1-Home Team Bookmaker Probability)) + 2*Home Team Bookmaker Probability

was created by Eureqa to minimise the historical MAPE of this equation when the Home Team Bookmaker Probabilities being used were those calculated assuming Overround-Equalisation. The 0.26 points per game reduction in the MAPE is being achieved without re-optimising this equation but, instead, simply by replacing the Home Team Probabilities with those calculated using a Risk-Equalising Approach.

Bookie_3 is the one Margin Predictor that responds poorly to the switch of probabilities without an accompanying re-optimisation in Eureqa. When I performed such a re-optimisation, Eureqa came up with this remarkably simple equation:

Predicted Home Team Margin = 21 * ln(Home Team Bookmaker Probability/(1-Home Team Bookmaker Probability))

This predictor has an MAPE of 29.22 points per game, which is extraordinarily low for such an easy-to-use predictor.

CONCLUSION

Virtually every algorithm used in MAFL has now been shown to benefit, however slightly, from using Implicit Probabilities calculated using the Risk-Equalising instead of the Overround-Equalising Approach. Naturallly, this makes me wonder if there's an even better way ...

Maybe next year I'll look for it.

Bookmaker Implicit Probabilities: Empirical Value of the Risk-Equalising Approach

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A few blogs back I developed the idea that bookmakers might embed overround in each team's price not equally but instead such that the resulting head-to-head market prices provide insurance for a fixed (in percentage point terms) calibration error of equivalent size for both teams. Since then I've made only passing comment about the empirical superiority of this approach (which I've called the Risk-Equalising Approach) relative to the previous approach (which I've called the Overround-Equalising Approach).
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Determining Bookmaker Implicit Probabilities: The Risk-Equalising Approach

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In the previous blog I developed a new way of divining a bookmaker's probability assessments of the two teams by assuming that he believes his maximum calibration error - the (negative) difference between his probability assessment for a team and its true probability of victory - is the same for each team in percentage point terms, and that he levies overround on each team's price so as to ensure that it will still deliver an expected profit even if his probability assessment is maximally in error.
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Measuring Bookmaker Calibration Errors

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We've found ample evidence in the past to assert that the TAB Bookmaker is well-calibrated, by which I mean that teams he rates as 40% chances tend to win about 40% of the time, teams he rates as 90% chances tend to win about 90% of the time and, more generally, that teams he rates as X% chances tend to win about X% of the time.
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Does an Extra Day's Rest Matter in the Home and Away Season?

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Whenever the draw for a new season is revealed there's much discussion about the teams that face one another only once, about which teams need to travel interstate more than others, and about which teams are asked to play successive games with fewer days rest. There is in the discussion an implicit assumption that more days rest is better than fewer days rest but, to my knowledge, this is never supported by empirical analysis. It is, like much of the discussion about football, considered axiomatic. In this blog we'll assess how reasonable that assumption is.
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Defensive and Offensive Abilities : Do They Persist Across Seasons?

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In the previous blog we reviewed the relationship between teams' winning percentages in one season and their winning percentages in subsequent seasons. We found that the relationship was moderate to strong from one season to the next and then tapered off fairly quickly over the course of the next couple of seasons so that, by the time a season was three years distant, it told us relatively little about a team's likely winning percentage. There is, of course, an inextricable link between winning and scoring, and in this blog we'll investigate the temporal relationships in teams' scoring in much the same way as we investigated the temporal relationships in teams' winning in that previous blog.
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What Do Seasons Past Tell Us About Seasons Present?

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I've looked before at the consistency in the winning records of teams across seasons but I've not previously reported the results in any great detail. For today's blog I've stitched together the end of season home-and-away ladders for every year from 1897 to 2012, which has allowed me to create a complete time series of the performances for every team that's ever played.
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How Many Quarters Will the Home Team Win?

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In this last of a series of posts on creating estimates for teams' chances of winning portions of an AFL game I'll be comparing a statistical model of the Home Team's probability of winning 0, 1, 2, 3 or all 4 quarters with the heuristically-derived model used in the most-recent post.
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How Many Quarters Will the Favourite Win?

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Over the past few blogs I've been investigating the relationship between the result of each quarter of an AFL game and the pre-game head-to-head prices set for that same game. In the most recent blog I came up with an equation that allows us to estimate the probability that a team will win a quarter (p) using as input only that team's pre-game Implicit Victory Probability (V), which we can derive from the pre-game head-to-head prices as the ratio of the team's opponent's price divided by the sum of the two teams' prices.
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Deriving the Relationship Between Quarter-by-Quarter and Game Victory Probabilities

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In an earlier blog we estimated empirical relationships between Home Teams' success rate in each Quarter of the game and their Implicit Probability of Victory, as reflected in the TAB Bookmaker's pre-game prices. It turned out that this relationship appeared to be quite similar for all four Quarters, with the possible exception of the 3rd. We also showed that there was a near one-to-one relationship between the Home Team's Implicit Probability and its actual Victory Probability - in other words, that the TAB Bookmaker's forecasts were well-calibrated. Together, these results imply an empirical relationship between the Home Team's likelihood of winning a Quarter and its likelihood of winning an entire Game. In this blog I'm going to draw on a little probability theory to see if I can derive that relationship theoretically, largely from first principles.
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The Changing Nature of Home Team Probability

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The original motivation for this blog was to provide additional context for the previous blog on victory probabilities for portions of games. That blog looked at the relationship between the TAB Bookmaker's pre-game assessment of the Home team's chances and the subsequent success or otherwise of the Home team in portions - Quarters, Halfs and so on - of the game under review.
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In-Running Models: Confidence Intervals for Probability Estimates

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In a previous blog on the in-running models I generated point estimates for the Home team's victory probability at different stages in the game under a variety of different lead scenarios. In this blog I'll review the level of confidence we should have in some of those forecasts. More formally, I'll generate 95% confidence intervals for some of those point forecasts.
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