The brainiacs at the Macquarie Research quant team are out with their picks for the 2016 Melbourne Cup. They have made a significant update to their model after what they admit have been “a couple of lean years” in their annual assessment of the field. This note became legendary in its early years, having picked a box trifecta in 2007 and again in 2010, and the winners in 2009 and 2010. The updated model is inspired by the rise of value as a theme in equity markets, spurring the team to use quant techniques “to capture how over- or undervalued horses are relative to their odds”. It’s called the Halpha model. The team explains: An under-valued horse will, on average, win more frequently than its odds imply, while the opposite holds true for an overvalued horse. For a risk-neutral punter interested in maximising returns, the optimal strategy is actually to consistently bet on the most undervalued horse, rather than the one with the highest probability of winning. This results in less frequent, but much bigger wins. However, we can also use the Halpha Model to “correct” the stated odds, and provide a rank prediction as we have done in prior… Read full this story
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HERE THEY ARE: The Macquarie quant team's tips for the 2016 Melbourne Cup have 307 words, post on www.businessinsider.com.au at November 1, 2016. This is cached page on Europe Breaking News. If you want remove this page, please contact us.