Brits on Pole

Earlier today we posted our half-time drivers’ round-up and asked what betting patterns revealed about the likely winner of the 2008 F1 World Championship.

Now it’s time to repeat the exercise for the Constructors’ Championship.

In that post we looked at a phenomenon called the Efficient Markets Hypothesis. This states that the market (in this case bets laid on a particular sporting outcome) already reflects all known information on a given subject.

Why have we been going on about this? Because we believe it offers a powerful tool for assessing how well drivers and teams have done so far – and for predicting this season’s winners.

It works on the principle that the huge amount of information and expertise applied by all those people who have already placed a bet on the season outcome encompasses all that’s worth knowing about Formula One racing this season.

And, if the punters are right, it looks like we’ll be enjoying a photo-finish with Hamilton pipped at the post by Raikkonen at the last minute.

To get our bearings, team-wise, let’s look at where things stand at the season’s half-way mark:

The thing to take away from this is that McLaren is not actually Ferrari’s main challenger for the title at the moment. The Woking team is some 24 points behind – easy to make up if McLaren has a wildly successful race and Ferrari a disastrous one, but fortune could so easily run in the other direction.

No, right now the biggest threat to Ferrari for the 2008 Constructors’ title would appear to be BMW Sauber, currently in its third year of operation.

This team scored a second place last year, with 101 world championship points, but this was due to the disqualification of McLaren. Winners Ferrari took 204 points and McLaren, had they stayed in the competition, would have scored at least 203, or possibly 218 depending on your point of view. But that’s an argument for another day.

Look at the odds below. The leader is in no doubt at all and no-one is offering a price on Ferrari that’s even remotely attractive. That 2/9 from William Hill’s about as good as it gets, and it certainly won’t have punters rushing into the streets clutching handfuls of cash as they hurry to the bookie’s.

But the really interesting thing is that, despite BMW Sauber’s success so far this season and its second place in the standings, the punters and the bookies do not agree that it is the second-most likely team to win the Constructors’

You can see below how it is not perceived as the Italian team’s biggest rival. That’s still McLaren, despite currently being 10 points to the south of BMW:

Constructors’ championship odds:

By converting these fractional odds to decimal odds we can turn them into data for a graph that allows us to compare how the three teams shape up as winning prospects.

As you can see, and remembering that the lower the odds the greater the perceived chances of success, no-one has much doubt that Ferrari is the favourite. McLaren are standing by in case of red-car misfortune and BMW a distant third:

And here’s a graph based on taking an average of each team’s odds, and showing this story very clearly for us:

So why might the markets be over-valuing McLaren at the expense of BMW? It might be that punters really don’t think the youngest of the ‘big three’ teams can keep up this level of performance until the end of the season.

It might be connected to the form book – and the fact that BMW managed to score just half the points total of the winning team last year.

Or it might be (and we think this is probably what is going on) that we have run up against a small flaw in the Efficient Markets Hypothesis as a way of predicting outcomes.

It is this: sometimes people bet on what they expect to happen rather than on what is actually happening.

And it is a good bet that Formula One fans expect Ferrari and McLaren, in whichever order they might come, to be first and second in the constructors’ competition.

We may have just done what the really knowledgeable folk call “finding some value in the market”.

And, if you think this is likely then consider scrutinising the odds table above and taking a real flyer on a BMW outright constructors’ win – probably 888.com at 16/1. Or, more circumspectly, enquiring about what odds might be on offer on a top three that goes Ferrari – BMW – McLaren.

Then bet on it before everyone piles in and the odds start to shorten.

To conclude, let’s take a look at how the markets have changed since we last tried this exercise on May 28 – just after Lewis Hamilton pulled off his spectacular win at the soaking wet Monaco Grand Prix.

This first graph shows odds from six bookmakers on this date – a slightly different range from the ones we’ve used today, but otherwise a pretty good fit. We’ve excluded Betfair because it works on a different model:

We learn that the correction might already be in progress. BMW has shortened quite a bit following its recent run of unspectacular but solid races – just the sort of thing that salts championship points away McLaren have lengthened a good bit, Ferrari fractionally.

Still, the picture’s still broadly as it was a couple of months ago. It’s now a question of whether BMW will be able to upset the form book and hang on to their advantage – or whether McLaren can grab the points back.