In our article about survivorship bias, we demonstrated that some unskilled tipsters would - in the short to medium term - achieve impressive results if the sample of unskilled tipsters was large enough. Because the sample consists exclusively of unskilled tipsters, the only possible driver of impressive tipping histories is dumb luck.
Below we have made a simulation of 1000 tipsters devoid of any predictive abilities, randomly making 200 tips at odds 1.96 for outcomes with a 50% chance of winning.
The graphs of the four most successful tipsters in the sample is displayed, in a similar way as they could have been on a tip selling website.
We have also enabled you to make changes to this simulation as you please.
Above we have displayed the graphs of the tipping histories of all the 1000 tipsters. The graphs of the four tipsters with the highest yield are represented with red lines.
Even though we know that all these tipsters are completely unskilled, the four luckiest performers, who are displayed above, produced impressive numbers for actual profit and yield. It should therefore be obvious that metrics other than actual profit and actual yield could be beneficial when assessing the quality of tipsters.
That is why we have introduced an advanced stats section for each of our tipsters. This article will cover closing line value profit and closing line value yield, which we from now on collectively will refer to as closing line value.
Most knowledgeable punters would agree with the theory that, more often than not, the accuracy of the market prices will increase over time - as the starting time of the event gets nearer. The likely driver of the odds sharpening is the price discovery process. More and more information and opinions gets incorporated into the market as time passes, which on average should result in the sharpest odds and lines being available when the market is closing for betting.
The reasoning behind “closing line value” is based on this “sharpening odds theory”. It assumes that Pinnacle’s closing prices, on average, are an accurate indicator of the likelihood of the different betting propositions.
As we covered in our article about how the bookmaker makes money, the reality is that all bookmakers add some margin to their odds. Even if Pinnacle has some of the smallest margins in the market, their prices do contain some margin. To be able to use Pinnacle’s closing odds to calculate closing line value, we must remove this margin from the closing odds. To do so, we use the method explained by Joseph Buchdahl in the how to remove the bookmaker’s margin article.
When we have removed the margin from Pinnacle’s closing odds, we compare these prices with the prices of the tipster’s tips to calculate the tipster’s closing line value.
Below we have made an example of how this works. You can display it by clicking display/hide.
Exceptionally skilled tipsters are likely to produce better actual numbers than closing line value numbers, as part of their edge will often never be fully absorbed into the market odds.
Many seem to think that closing line value profit/yield is a superior benchmark for evaluating the quality of a tipster to the far more common actual profit/yield. While that is often true, it does depend to a large degree on circumstance. The most relevant question is: how many tips has the tipster made? This is because the closing line value metrics provide a much better snapshot of a tipster’s quality for smaller and intermediate samples than the actual numbers.
Other relevant questions include: which sports/markets are the tipster providing tips for? And what are the working processes employed by the tipster for identifying value bets?
It is indisputable that, in almost all situations, assessing both the actual and closing line value metrics together - will provide you with more insight and increase your chances of identifying tipsters who are unlikely to sustain an impressive looking performance.
For a tipster making tips on mainstream sports and events, the closing line value numbers are almost always a superior indicator of quality, as long as the total number of tips is not enormous.
This is because Pinnacle’s closing odds are usually an excellent indicator of the likelihood of various outcomes for most mainstream sports and markets, and because luck will have a more profound impact on the actual win/loss numbers, than most people realize, even for tipping histories containing a large number of tips.
The more illiquid a betting sport or market is, the less sure you should be about the accuracy of the closing odds - and as such also the merit of the value of the closing line value numbers. If the tipster is providing tips for some obscure derivative market or a very minor betting sport, you should put less faith in the closing line value metric.
How well a tipster performs on the closing line value profit/yield also depends on his working processes.
If the driver of the tipster’s tips is information obtained or digested faster than the market, the odds of the tipster’s tips are likely to drop as the market catches on and obtains or digests the tipster’s information. Such a tipster should perform well on both the Actual and Closing line value metrics.
If the driver of the tips is a fundamentally new or different way of evaluating a sport, it is less obvious that the tipster will perform well with Closing line value profit/yield.
Exceptionally skilled tipsters are likely to produce better actual numbers than closing line value numbers, as part of their edge will often never be fully absorbed into the market odds.
An example of both an exceptional punter and a different way of evaluating a sport is Joe Peta. He documented in his book, Trading Bases, how he built a model that beat the mainstream MLB markets during the 2011 season. As his model used a fundamentally different approach from most other punters, it is far from certain that his edge would be incorporated in the market odds. This also holds true for the closing odds.
It would not be surprising if the bets provided by his model performed substantially worse if measured by closing line value rather than actual value/yield. For such tipsters, you should not necessarily take a lack of performance - if measured by the closing line value metrics - as an indicator that the success will not last.
Yet even if special cases exist, they are few and far between. The reality is that almost every tipster can be better evaluated if you consider both the actual and closing line value metrics together, and if you have to choose only one as your benchmark, it should be the closing line value rather than the actual profit/yield.
Considering the undeniable merit to the end users of closing line value, some are surprised by how few tipsters actually make such statistics available. Sadly the likely reason is that very few tipsters are able to deliver when measured by this benchmark. As this is the case, many prefer not to share such information. We strongly recommend that you focus on tipsters who provide you with their closing line value numbers. Providing you with such numbers not only puts you in a far better position for evaluating their performance, but it is also a clear signal about their willingness to be transparent.
In our article about closing line value and actual profit/yield, we have made simulations comprising both odds movements and results of tips, and have taken a look at how the closing line value and actual numbers interact for different groups made up of entirely unskilled tipsters. This should provide some clues as to the usefulness of closing line value as an indicator of a tipster’s quality.
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