Favorite–longshot bias appears when traders pay too much for low-probability outcomes and too little for high-probability ones. This leads to distorted prices where longshots look more attractive than they should, while favorites look slightly undervalued. The bias often emerges when markets have emotional participants, thin liquidity, or traders who enjoy betting on exciting, low-chance outcomes.
On platforms like Polymarket, Kalshi, Myriad, and Manifold, this bias can appear in political, economic, crypto, and cultural markets. It becomes visible in prediction markets data when probabilities cluster too high for unlikely events or too low for highly predictable ones. The bias doesn’t mean the market is broken—it simply reflects how human behavior and incentives sometimes shape forecasts. Recognizing it helps analysts interpret market odds more accurately.
Favorite–longshot bias is especially important in fast-moving or highly emotional markets, where crowd enthusiasm or fear can push probabilities away from their fair value.
This bias affects the accuracy and interpretation of prediction markets data. Understanding it helps analysts distinguish between true information signals and emotion-driven pricing.
It appears when traders place value on entertainment, narrative appeal, or small upside potential. Longshots feel appealing because the cost is low, while favorites can feel “boring” to buy. In thin or emotionally charged markets, these tendencies are amplified, producing prediction markets data that skews away from real-world likelihoods.
If longshots are consistently overpriced, markets may show inflated probabilities for unlikely events. If favorites are undervalued, markets may understate how likely a well-supported outcome actually is. This skews prediction markets data and makes raw probabilities less reliable unless adjusted for bias.
Analysts can identify when markets are being driven by sentiment rather than information, flag potential mispricing signals, and understand where forecasts need careful interpretation. Tracking the bias across event types also reveals which categories attract emotional trading versus informed trading, improving the use of prediction markets data in modeling.
A high-profile political market on Polymarket shows an unlikely candidate receiving significantly more probability than polling or expert analysis suggests. Analysts reviewing the data note a clear longshot premium, signaling that enthusiasm—not information—is driving part of the price.
Detecting this bias requires detailed probability histories and liquidity data. FinFeed's Prediction Markets API provides structured prediction markets data that developers can use to identify longshot inflation, favorite undervaluation, and behavioral distortions in market pricing.
