RAC 8.59% $2.15 race oncology ltd

How much to bet on RAC (or on anything)

  1. 2,072 Posts.
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    Kelly Criterion

    Proportion of total assets to bet
    = (p Payout - 1 ) / ( Payout - 1)
    where 
    p is probability of the payout
    Payout is the winnings multiple of the original stake returned (including the original stake itself)

    Proof of formula is here:
    http://www.aussportsbetting.com/2010/07/14/kelly-criterion-derivation/

    Example 1
    p = 0.2
    Payout = 10
    Proportion to bet = (2 - 1) / 9 = 11.1 %

    Example 2
    p = 0.6
    Payout = 2
    Proportion to bet = (1.2 - 1) / 1 = 20 %

    Example 3
    p = 0.525
    Payout = 2
    Proportion to bet = (1.05 - 1) / 1 = 5 %

    Example 4
    p = 0.35
    Payout = 3
    Proportion to bet = (1.05 - 1) / 2 = 2.5 %

    Example 5
    p = 0.4
    Payout = 2
    Proportion to bet = (0.8 - 1) / 1 which is negative.
    So don't bet anything.

    Disclosure:
    I'm close to Example 1
 
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