The favourite–long-shot bias is the tendency, found in betting and prediction markets for decades, for low-priced outcomes to win less often than their price implies and favourites slightly more often: a 5% long shot may win closer to 3–4% of the time. It is real on average but small, uneven between markets and largely eaten by fees and spreads, so it is a reason to read low prices with care rather than a trading rule. Nimb's own calibration check of 1,353 resolved 2026 Polymarket markets did not find it: outcomes priced between 5% and 15% a week out happened 16% of the time.
Why do long shots look overpriced?
- Preference for big payouts. Some traders pay extra for a small chance of a large win.
- Costs at the extremes. Selling a 3% long shot ties up 97¢ to make 3¢, so few traders bother, and the price stays high.
- Minimum tick. A price cannot go below 0.1¢ or 1¢, so very unlikely outcomes are rounded up.
- Misjudged small probabilities. People tend to overweight rare events.
Studies: horse racing (Griffith, 1949, and many since), sports betting and prediction markets (Snowberg and Wolfers, Journal of Political Economy, 2010, who attribute it mainly to misperceived probabilities). Accuracy research.
Can you profit from it on Polymarket?
Rarely by much. Buying No on a 5% outcome costs 95¢ to make 5¢; if the real chance is 3.5%, the expected gain is about 1.5¢ per share before fees and before the time your money is locked up. One surprise erases many such trades. Buying No · position sizing.
Frequently asked questions
What is the long-shot bias in prediction markets?
Low-priced outcomes win less often than their prices suggest, on average across many markets.
Are favourites underpriced on Polymarket?
Slightly, on average, in many studies of betting markets. The effect varies by market and is small after costs.
Last reviewed 8 November 2026 · Data from Polymarket · Not financial advice · Nimb is not affiliated with Polymarket.