EV vs variance?

Hi,

1) In gambling, the larger the variance of the game, the more likely I will lose bigger but I will also higher chance to win bigger. On the other hand, game with smaller variance, i will more likely to lose less at the expense of less potential winning. Is my layman interpretation correct?

2) so game with smaller house edge but larger variance and game with larger house edge but have less variance, which game should I play given the choice?

I suppose the answer will come down to which concept is more important in gambling?

Thanks

The answer to #2 may also come down to your bankroll. My "gut" answer is, play the smaller house edge, but it's not as easy as that.

Suppose there is a slot machine with a house edge of 0.1% - but it gets it from the fact that there are only two possible results; you lose with probability 99,999 / 100,000, and you win 99,900 with probability 1 / 100,000. Is it "worth" your time to play it?

I think that for a given variance, higher EV is better.
How much variance you can handle is likely determined by your bankroll and style of play.

Quote: Dieter

I think that for a given variance, higher EV is better.
How much variance you can handle is likely determined by your bankroll and style of play.
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I like as little variance as possible so I only bet when the outcomes are playing my game. My EV is set in stone.

Quote: mrkent

Hi,

1) In gambling, the larger the variance of the game, the more likely I will lose bigger but I will also higher chance to win bigger. On the other hand, game with smaller variance, i will more likely to lose less at the expense of less potential winning. Is my layman interpretation correct?

2) so game with smaller house edge but larger variance and game with larger house edge but have less variance, which game should I play given the choice?

I suppose the answer will come down to which concept is more important in gambling?

Thanks
link to original post

I'd say your laymen's interpretation on #1 is correct, I always like to think of variance as the "swings" of your money given a certain game.

#2 is personal choice, to use an example on VP because that's what I am familiar with, let's say you had to choose between Illinois Deuces (98.91%) w/ a variance of 25.6, vs. 9/6 Double Double Bonus (98.98%) w/ a variance of 41.98. EV wise you'd wanna play 9/6 DDB, but can your bankroll (and your emotional tolerance for how much money you can lose) handle the big downswings on DDB? For multiple visits in a row? What if you hit a drought on quads and royals while playing for months? Only you can answer that type of question for yourself.

Quote: mrkent

Hi,
2) so game with smaller house edge but larger variance and game with larger house edge but have less variance, which game should I play given the choice?

I suppose the answer will come down to which concept is more important in gambling?

Thanks
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choose the game with lowest HE if you plan on playing that game often.

ie: 9/7 tdb video poker is ~99.7% return but high variance.
if you dont hit one of the 4 special quads, you're going to be down ALOT.
if you're not going to play it often (less than 5k hands/yr), then dont play this!

of course you can get lucky like i did and get 4 handpays in 2 hrs at $1 denom ($5/spin).
yup, hit one of those special quads 4 times! and one of them was just holding the Ace. Got quad 3s on redraw