What is favourite-longshot bias?
A favourite-longshot bias is a term used within finance, economics and sports betting. It refers to a phenomenon where the bettor will choose to bet on the long shot over the favourite. This is a studied phenomenon where the long shots are over-valued and the favourite is under-valued.
Where have you heard about favourite-longshot bias?
There have been many different explanations and numerous studies addressing this issue. When it comes to sports betting, it's recognised that bettors often display risk-loving behaviour, perhaps because there is no sure high return when betting and it can often be an experience of extremes.
What you need to know about favourite-longshot bias.
With favourite-longshot bias, bettors experience two different attitudes towards risk; risk aversion toward the favourite and risk seeking towards the long shot. This can seem as though it defies logic – why would you place a bet on the least likely candidate to win? The thought of the return can't be the sole factor in these decisions. It has to do with cognitive bias, the rule of heuristics and often “going with your gut”, even if that requires ignoring all the information presented to you to help you make an informed and realistic decision.
Find out more about favourite-longshot bias.
To find out more on favourite-longshot bias, take a look at our page on risk.