Dr. Z's Beat the Racetrack

Category: Puzzles & Games
Author: William T. Ziemba, Donald B. Hausch


by Terretta   2019-09-07
> A breakthrough came when Benter hit on the idea of incorporating a data set hiding in plain sight: the Jockey Club’s publicly available betting odds. Building his own set of odds from scratch had been profitable, but he found that using the public odds as a starting point and refining them with his proprietary algorithm was dramatically more profitable. He considered the move his single most important innovation, and in the 1990-91 season, he said, he won about $3 million.

The article suggests he came up with arbitrage vs. other bettors in 1990, a kind hedge fund for horse racing “without precedent”.

On the contrary, my college roommate and I had Dr. Z’s Beat the Racetrack from 1987:


> Benter had achieved something without known precedent: a kind of horse-racing hedge fund, and a quantitative one at that, using probabilistic modeling to beat the market and deliver returns to investors.

In fact the 1987 edition was even preceded by Beat the Racetrack by William Ziemba from 1983, a decade earlier than the innovation described in detail here:


From the book blurb:

William Ziemba and Donald Hausch explain the fundamentals of track racing and show how patterns of public inefficiency in betting pools can lead to you reaping big payoffs. Rather than focusing on the complicated details of thoroughbred handicapping, the groundbreaking “Dr. Z” system offers mathematical models based on stock-market analysis.

William T. Ziemba is professor of management science at the University of British Columbia, Vancouver, Canada. He is an expert in operations research and portfolio management and has served as consultant to the Canadian government on lotteries and pari-mutuel betting systems. Donald B. Hausch has a doctorate in managerial economics and decision sciences from Northwestern University, and is currently teaching in the School of Business at the University of Wisconsin, Madison.