Using Behavioral Finance in sports betting Part II

Gamblers Fallacy and Statistical Significance.

If I flipped a coin and it landed heads ten times in a row what do you think the odds are that the 11th flip lands heads? If you thought anything along the lines of "not very good" or "tails is due" then your brain is using a shortcut to process information called "gamblers fallacy." The odds of the coin coming down heads is 50/50, the previous flips have no influence at all on the next flip.

The human brain is very good at detecting patterns and using that information to make decisions. The problem sports bettors, and investors, run into is that they often think they have identified a pattern in what is really just random data.

I am not introducing anything new to the field of statistics at this point by pointing out you must test your data for any kind of statistical significance. Without going too deep into how to do this I will simply say that for the purposes of sports betting you should be looking for a 1:1000 event.

For example, you believe you see a pattern in hockey where home teams playing the first game after a 3 game or more road trip and who are +200 or better on the ML win a high percentage of the time. If you test this hypothesis it needs to have a minimum winning record of 66-34 out of a 100 game sample size to be statistically significant.

Hopefully this helps to get you thinking about how your brains natural processing of information can sometimes lead to mistakes and one way you can use statistics to combat that. Also, if you are not familiar with using statistics formally hopefully this will lead you to investigate that discipline more thoroughly. It will help you win more bets.

That is all for now and as always Best Of Luck in whatever you play!