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Additionally, there will always be a significant amount of 'inside information' in horse racing that cannot be readily included in a statistical model. Trainer's and jockey's intentions, secret workouts, whether the horse ate its breakfast, and the like, will be available to certain parties who will no doubt take advantage of it. Their betting will be reflected in the odds.
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This is something I've known for a long time but not thought very clearly about.
Everyone sees it when it comes to first time starters and even some layoffs because the inside money will sometimes scream at you (or its absence indicates the horse is not ready). But the same thing is going on in other types of races. It's just harder to notice. You'll see some horse bet down or not take much money and wonder what everyone else sees that you don't. Sometimes you may be missing a trip, bias, trainer pattern, the figures you are looking at are different than the more influential TG/RAG sheets, but sometimes insiders know the horse is set for his "A" race or missed some time and is less than 100% and you don't.
