The reason why you generally shouldn't bet longshots is that these kinds of bets do not get paid high enough. If you notice most long-shot bets, you will see odds that look attractive at first sight. For example, a basketball game where one team is down by 25 points going into the 4th quarter, you might see the odds paying out 15-to-1 for the losing team to come back and win. But if you think about it, the odds for the losing team to come back in this case are probably much worse than 1-in-15.
People often talk about the "vig" as the cost of placing a bet, but this is only true for multi-sided bets (for example, the "over/under"). But for one-sided bets, there may be an additional cost if the payout of the bet is lower than the statistical odds (after factoring in the vig). The only way you could figure out the true odds would be to do a statistical analysis, which is impractical. In our basketball example, if the true odds of the team coming back are really 1-in-30, then you are really paying a 50% cost just to place the bet. This cost is money you will definitely lose, because it is money you won't get - even if you win. This concept of getting an adverse "price" of the bet is similar to the concept of "slippage" in trading stocks.
The main reason why sportsbooks are able to do this, in my opinion, is psychological. Many bettors are looking for large payout, and when this kind of bettor is offered 20-to-1 odds (where you can win $1,000 for a simple $50 bet), they are so seduced by the large payout that they simply don't think about whether they are getting paid enough to take the bet. Additionally, there may be a legitimate reason why sportsbooks underpay on longshots - risk management. In order to payout huge odds, they may need to take additional profit to compensate for the risk.
The only exception to the adverse odds offered on longshots is for season-long bets, such as who will win the Super Bowl. Sites like Bodog will offer odds as high as 200-to-1 to the worst teams. Even if these odds are "underpaid", these payouts are still very respectable.
If you are looking for a high payout, you are better off placing a parlay bet with odds that add up to the equivalent of a longshot. For example, if you parlay 2 different 5-to-1 bets, then you are getting 25-to-1.
HPG ADMIN on June 1, 2015