Naive Betting Strategy Review
Each week we review several simple hypothetical betting strategies, including 1) betting with changes in the spread, 2) fading the public (i.e. betting on teams to cover that have garnered less than 40% of public betting support), 3) taking all favorites to beat the number, 4) backing all home teams versus the line and 5) supporting home underdogs ATS. Consistent with research on the topic, we expect certain trends to exhibit profitability over extended horizons. For example, Paul and Weinbach (2010) find evidence of statistically significant profitability related to betting against public sentiment; and Borghesi (2004), Gandar, Zuber and Lamb (2007), Borghesi (2011) and Humphreys, Paul and Weinbach (2013) all validate the existence of a home underdog effect in NFL betting markets. But, while over reasonably long timeframes these tendencies are likely to manifest, from one season to the next we allow for the potential emergence of shorter-term drifts that run counter to these bigger picture predilections. We hope this form of analysis serves as a cross-check for our power rankings and computer simulation-based picks from one week to the next.
The Betting Line
Per TheFootballLines.com's database, at 6-6, line movement was registered another lackluster week forecasting ATS outcomes. Accordingly, the season-to-date record for this factor improves to 38-34-1.
Pushing back against the view that herding (at extremes) is a contrarian indicator, the public was 6-1 in week 5. However, the tide turned (again) last week for what might be the most volatile factor on our radar. Teams that collected less than 40% of spread betting volume finished 5-1 ATS in week 6 and are restored to profitability. This factor's record improves to 29-24-1.
According to closing lines reflected on Yahoo! Sports, underdogs recorded another scorching (10-4 ATS) performance in week 6. As such the streak of consecutive weeks of profitability climbs to four and the record for teams taking points is now a blistering 53-36-2, for better than a 58% win rate and more than 13 units of profit on the season.
Road teams also extended a multi-week winning streak in week 6, covering 8 games versus only 6 ATS losers. Away teams 48-41-1 season-to-date record translates to , for a loss of 9 units. Conversely, while backing traveling teams to cover has amassed +5.0 units of winnings over the last two weeks, this approach is a modest loser (-0.5 units) season-to-date, assuming the standard vig.
Consistent with the strong performance from underdogs broadly, home teams that received points finished 3-1 ATS in week 6. After paring early season gains for the last few weeks, this cohort's 20-15-2 record is again solidly profitable.
Profitability Summary for Naive Strategies
Underdogs +13.4 units
Home Dogs +3.5 units
Road Teams +2.9 units
Fading Public +2.6 units
Line Movement +0.6 units
The Good, the Bad and the Ugly
We were 4-5 last week for a loss of 1.5 units. With the exception of the Lions (whom we took as 4.5 point underdogs), our plays on favorites failed -- we were 1-4 ATS laying chalk. Clearly, our model has not calibrated to the tremendous run underdogs have enjoyed this season. The highly unusual nature of an extended hit streak for dogs might explain why our work has been confounded. For instance, over the past five completed NFL seasons, underdogs are a combined 496-478-32, for about a 51% win rate. Further, the year-over-year win rates for out-of-favor teams over this period deviated very little from the bigger picture average: dogs covered at a 51% clip in 2012, 51% in 2013, 52% in 2014, 49% in 2015 and 52% last season.
Additionally, we have observed over this period the tendency for weeks characterized by abnormally high underdog ATS win rates to be followed by more typical weeks. Specifically, dogs cover rate met or exceeded the 60% threshold in about one week in every five over the examination period, on average. These strong outs for underdogs tended to foreshadow a statistically significant drop in this cohort's cover rate the following week (the average ATS win rate following big weeks for dogs is 51% -- inline with the long-term average. [We could not validate a notable causal relationship though between these variables.]
Given the extended run underdogs have embarked upon this season, we note that these historical predilections may not offer much guidance this season, but that is precisely our point: the current is indeed an exceptional period. As our model is constructed specifically to avoid overreaction, it will only adjust over time to the underdogs' upheaval.
The following chart illustrates the season-to-date profitability of our published picks.
Down to Brass Tacks
Our power rankings factors generate nine ATS plays for Sunday. The following table illustrates each of our wagers, the actual vigs we incurred, the expected cover margin, an account of the appropriate model's season-to-date performance picking games featuring the involved teams and an indication of the extent to which the public is aligned with our thinking (as reflected by the percent of spread bets tracked by SportsInsights that back our pick).
Our power ranking framework is skewed 7-4 in favor of teams laying chalk this week--including our botched Thursday Night Football play (in which Kansas City had all but secured the cover, until the Chiefs inexplicably ran the ball out of bounds on a 2nd down play with less than a minute and a half to go in the fourth, leaving Derek Carr and the Raiders just enough time for the game-winning touchdown drive).
Admittedly, this roster of picks is alarming, as underdogs are 37-21-1 over the last four weeks alone. But, as our discipline compels us to bet ALL picks triggered by our methodology, we lay our wagers, hold our nose and hope for the reversion that, if absent so far this year, has historically eventuated for favorites after a tough patch.
Separately, after a conspicuous absence since week 4, our power ranking + computer simulation work registers full house signals this week on the Fins and Pats (both are favored to win). Recall that such signals are triggered when all of the power rankings and sim factors in our lineup endorse a singular against-the-spread outcome. While this contingent of picks is a disappointing 3-4 so far this season, such plays have historically generated above average returns. If dogs blistering performance does in fact moderate today, these picks especially might be ripe for a payday.