Market Fallacies

Every now and then, I compare the sports gambling market to the stock market. I think the comparisons are apt, I just choose to be in the sports gambling market because I like sports more than CNBC and I have more knowledge (now) about the sport market than the financial market. So, it should come as no surprise that some of the reasons that people fail in the financial markets are the same as why people fail in the gambling markets.

Sweet, over at RMMB, posted a good article about this very topic. Moneyline already did a thorough, must-read breakdown of each and every fallacy covered in the article. However, I wanted to apply two of them to me.

From the article:

Recency effect: People tend to overweight recent events in considering the probability of future events.

Optimistic bias: People tend to be overconfident about their own abilities and the outcome of their plans. Something like 90% of people think that they are above average drivers less likely to get into an accident than the average joe.

I think this might explain some of the reason for my downturn this year. I am fairly certain that I overrated my skill versus the variance of the market. The 2008-09 season was particularly kind to contrarian gamblers, due to the large number of upsets in CFB. It also coincided with a personal unit size increase of 400% (as opposed to 25% this year). As such, I probably overvalued my season last year.

This post is yet another in a string of Wednesday posts attempting to use science and logic to determine why my record isn't as strong this year. I'm hoping that my record sucks due to small sample size and my goals were unrealistic. One could also use Occam's Razor and conclude I'm a shitty gambler. I suppose we'll find out as time goes on.

Interestingly, after that whiny, bitchy post on Monday, I ended up down 3x for the week. After a couple of those losses, it just felt like I was down 10x.