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Negative Variance: The Sports Handicapper’s Enemy

One of the most pervasive enemies of a sports handicapper is negative variance, which isoften times referred to as ‘bad beats’ within the gambling world.  For example, let’s assume that Team A is averaging 1.2 fumbles per game on the season, yet inexplicably suffers five fumbles in a game in which you have placed your hard-earned money.  Due to the fact that fumbles are 90% random in the NFL, the foregoing example would epitomize negative variance.  Unfortunately, over the last few weeks, I have experienced my fair share of negative variance in games that squarely had the odds heavily in my favor:

  1. On April 18, 2010, I released the Chicago Cubs are a 5 Star Club selection to my private clients.  Despite leading 2-0 in the 8th inning, the Cubs found a way to blow the lead and ultimately lose in extra-innings.  What made this loss so painful was the fact that Chicago also held a 2-1 lead in the 9th inning and was three outs away from a patented 5* win;
  2. Following that inexplicable loss on Chicago, I released the Boston Red Sox as a 5 Star Club investment on April 25, 2010.  Despite leading 4-1 at home in the 7th inning, the Red Sox proceeded to give up three runs with two outs in the inning.  After getting a lead-off double in the 8th inning, Boston failed to advance the runner and ultimately lost in extra-innings.  What made this loss so difficult to swallow was the fact that Boston held a commanding 4-1 lead at home in the 7th inning against the worst offensive in the American League;
  3. Following back-to-back blown leads (and losses) in the 7th and 8th innings, I released the Kansas City Royals on April 27 2010.  Behind Zack Greinke, the Royals had a 2-0 lead in the 8th inning and recorded the first out of that inning before ultimately losing 3-2 to the Seattle Mariners;
  4. On May 8, 2010, I released another 5 Star Club selection on the Utah Jazz (money line and point spread).  Despite maintaining a 104-100 lead late in the fourth quarter and a 106-103 lead in the final minute, the Jazz ultimately lost the game 111-110 based upon the Lakers’ unforeseeable three-point shooting.  In that game, Los Angeles shot 13-of-29 (44.8%)  from beyond the arc, which is a significant variance from the Lakers’ regular season totals from three-point territory (7-of-19; 33.4%).  What made the Lakers’ shooting variance so devastating was the fact that they made three of those 3-pointers in the final two minutes of the game, which cost me the game and the cover.

The good news for sports bettors is that negative variance (i.e. bad beats) generally balances out with fortuitous wins over the course of a season.  While negative variance is an inherent part of sports gambling, it is important to remember that sports investing dictates a long-term investment strategy, much like the stock market.

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