I’m no gambler, but lets see if I can explain this correctly.
The betting favourite to win a race, or any other competition, isn’t necessarily the one most likely to win, but rather the one the bookies can’t afford to win and payout on. A “favourite” is simply the horse which the bookies give the lowest odds to. This in turn is a result of 2 key factors; firstly their chance of winning, and secondly the amount of bets and cash which has been placed on that result.
Take, for example, the football World Cup. If England are playing, then their likelihood of winning may be actually quite remote, but a huge number of fans will still bet on that result. They have done so for mainly sentimental and patriotic reasons, which are unconnected with the team’s chances of success. In the unlikely event ofEngland winning, however, the bookies would stand to lose a fortune. They deal with this by reducing the odds on the win, and therefore their potential liability, whilst at the same time dissuading gamblers from making more bets by offering a low return. The upshot of this is that England are made the bookies favourite to win the World Cup, even though they are not the most likely winners.
This form of “balancing the book” is also evident in the stock market, which is simply a different form of gambling on the potential outcome of events. All bets or trades have to balance their liabilities, and the riskiest ones are set-off with other organisations, thus insuring against any big losses.
So the next time you hear of someone or something being the bookie’s favourite, remember that it does not necessarily mean that it is likely to win.