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At 12.45 on Sunday 18th October I like the rest of the nation was tuning in to watch Ireland v Argentina. I admit Rugby does not rank highly on my list of interests, so I thought it wise to consult the market before the game started to see what the consensus was. As sports betting markets are “semi-strong form efficient” individuals react quickly to new information, therefore the match betting prices are always changing to reflect new information. This blog is to discuss the market I was presented with. Carl Widger previously blogged about betting and the stock market, which can be read here

 

In the lead up to the RWC, Ireland were 8/1 to win the tournament, which had 16 qualifying teams at that time. There was always going to be tough games ahead to lift the trophy. On 18th October before the quarter-final Ireland were 9/1 to win the competition. One would have thought the price would have reduced considering 8 teams had already exited the betting. Yet the price increase took into account the injuries on the Irish squad etc. so their odds actually drifted.

 

We make decisions to buy on the stock market or lock in a bet when we believe we are getting value for money. Value for money on what we perceive as an undervalued security. With this in mind, I decided to keep an eye on the changing market as the Ireland game progressed.

 

Score         Betting over 80 minutes                Return on a €10 punt (Return inc. €10 stake)
Pre match Ireland 8/13 Argentina 17/10 Ireland €16.15 Argentina €27
Ireland 0 Argentina 17 Ireland 7/2 Argentina 1/5 Ireland €45 Argentina €12
Ireland 17 Argentina 20 Ireland 4/5 Argentina 13/10 Ireland €18 Argentina €23
Ireland 20 Argentina 23 Ireland 5/6 Argentina 7/5 Ireland €18.33 Argentina €24
 Ireland 20 Argentina 38 Ireland 100/1 Argentina 1/1000 Ireland €1010 Argentina €10.10

 

As the scores changed so too did the betting. Argentina went 17 points to 0 Ireland, it looked like it was game over. Match Pricing:  Ireland 7/2 Argentina 1/5. To lock in a price of 1/5 for Argentina to win the game represented a decent return based on the run of play to that point. Many investors would be happy to secure a 20% increase on their investment – If you apply the logic here to buying into the stock market it could be said you are buying in at the top.

 

As the game went on, Ireland clawed back to 20 and within 3 points of Argentina. The market price reflected Ireland’s momentum, although Ireland were losing by 3 points they were favourite to go on and win the game. This momentum creates a perception which is a lot more emotional than it is logical. At this stage the pricing is Ireland 5/6 Argentina 7/5. The effort on the pitch lead to a market discrepancy. Had an investor decided at that point that Argentina would hold on to their lead, which was to go against the general consensus of the market, they would have secured a price of 7/5 resulting in a whopping return of 140% on investment – If you apply the logic here to buying into the stock market it could be said you are buying in at the bottom.

 

So what is the conclusion of all of this? Markets reflect information that is available to us regardless of whether it is share on the stock market or Irelands odds against Argentina. Our perception of the market is often flawed and driven by our emotions. When Ireland went 3 points behind Argentina, the market made Ireland favourite. Therefore markets can be incorrect as they are driven perception. At Metis we say timing the market is mission impossible. It is only when you look back over a period of time you can see whether you were at the top or bottom.

 

Should you wish to discuss your portfolio or re assess your risk preference please do not hesitate to contact us on 061-518365.

 

Niamh Breedy

Financial Planner

 

Metis Ireland Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland. All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified independent financial adviser before entering any financial contract. Metis Ireland Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.