Capitalizing Upon Market Inequities:
A Game Plan for Successful Sports Investment
Palisade User Conference - 2009
Clay Graham – BaseballWon.com
October 22, 2009 – New York
© 2009 BaseballWon.com, all rights reserved
Why are we here?
•
•
•
•
Intellectual curiosity
Skepticism
Greed
Got lost on the way
a to the bathroom
© 2009 Baseballwon.com, all rights reserved
1
Let’s See What’s Up?
•
•
•
•
Historical Perspective
Some Results
Observations
How it Works
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Historical Perspective
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2
Time Line – Persistence Has its Own Rewards!
Palisade’s Significant Role
Optimal
Batting
Oder
Gaming
Optimal
Bating
Order
Economics
of Sports
Investment
Let the
Games
Begin
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Beginning of a Healthy Competition
“ MIT – Kellogg Challenge”
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3
Some Results
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In the Beginning!
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4
Competing with the Pros
Win / Loss
Winning % = 60%
(started 2 months late)
Top .1%
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Average Daily ROI up to 23% (with no Compounding)
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5
9 and 3 in 2009 Playoffs
most games too close to call
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Who Cares ?
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6
Observations
(some Inequities)
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Runs are the Currency of Baseball
It’s simple – the more runs you score
the greater likelihood you’ll win.
100%
90%
Probability of Winning
P
80%
70%
60%
50%
40%
30%
20%
10%
0%
1
2
3
4
Source: MLB.COM 2003-2008 AL Scores
5
6
7
8
9
10
11
12
13
14
Runs/Game
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7
Home Team Favored Inequity
Favored 70% of the time while winning 55%*
-
Source: Chicago Tribune 10/1/2006
*Covers.com 2005-2009
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Umpire Calling Inequities
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8
Umpire Calls Influence Scoring
Umpire Bias: Runs/Game Influenced by Umpire K/BB calls
12
11
Runs/Game
10
9
8
7
6
1.5
1.7
1.9
Source: Baseball Prospectus, Umpire statistics 2005 – 2009
Tabulated by CJG
2.1
2.3
2.5
2.7
2.9
K/BB
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Sports Gaming Inequities Rule: This is
Where the Reward / Risk Resides
Game
Lines
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9
How it Works!
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Where it Works
Game
Investment
Decision
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10
Scoring Profile: Interdependencies
(Building Blocks of Scoring and Winning)
Runs the result of multiple factors
Batter
B tt
Park
RUNS
Ump
Pitcher
© 2009 Baseballwon.com, all rights reserved
Key Metrics
• Expected value of runs per plate
appearance (EVR/PA)
• Comparable (pitcher & batter)
• Scalable
• Road and Home
• Team Ranking
g
• Road & Home
• Offense & Defense
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11
Expected Value Primer
(Binary Scenario: Win / Loss)
P(win) = P(w) = probability of positive outcome
r = positive outcome payoff - receipts ($)
P(loss) = P(l) = probability of negative outcome {P(l)=1-P(w)}
c = cost of negative outcome ($)
EV = expected value
EV = P(w)*r – [P(l)]*c
EVROI = Expected
E
t d value
l off return
t
on investment
i
t
t
EVROI = {P(w)*r – [1-P(w)]*c}/c
© 2009 Baseballwon.com, all rights reserved
Helpful References
Line Conversion to Probabilities
Probability of Winning
Line Trade-off matrix
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12
What Does -145 mean?
• Favored team
• Invest $145 to win 100
• Implied probability of winning >= 59%
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Game Profile
EVR/PA Road Pitchers
EVR/PA Home Pitchers
EVR/PA Home Batters
EVR/PA Road Batters
NYY Bat Pitch ranks
Angels Bat Pitch ranks
Expected Value Total Runs
Probability Winning – NYY
Expected Value ROI
© 2009 Baseballwon.com, all rights reserved
13
Remember!
“Picking a winner is not at all the same
thing as making a smart investment”
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What are the Odds (lines)
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14
Smart Line
P(win road)= 100-41% = 59%
EV ROI = 25%
© 2009 Baseballwon.com, all rights reserved
Evolver Decision Model
• Maximize Expected ROI
• Variables
V i bl (filters)
(filt
)
• Probability of winning
• Data base period
• Rectangular hyperbola (P(w)* EVRO
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15
Foundation: Database, Model & Discipline
Discipline of
Implementation
Model
Database
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Foundation: Database – Where’s the data?
Discipline of Implementation
Model
Database
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16
Foundation: Model
Stat
St t Tools
T l
Discipline of
Implementation
Model
Evolver
Database
@ Risk
© 2009 Baseballwon.com, all rights reserved
Foundation: Database, Model & Discipline
• Don’t invest during first
Discipline of
Implementation
•
Model
Database
•
and last month of the
season.
Invest as fixed % of
bankroll per investment
,e.g. 3%.
o t change
c a ge st
ategy
Don’t
strategy
based on short run
outcome.
© 2009 Baseballwon.com, all rights reserved
17
Perspective
“ I want to tell you something….
I’d see an accident like that and feel weak inside,
I wanted to quit … stop …and walk away.
…but I’m older now.
When I see something really horrible, I put my foot down, HARD, because
I know everyone else is lifting his.
… there is no terrible way to win. There is only winning.”
Yves Montand
(as Jeane-Pierre Sarti in movie Grand Prix)
© 2009 Baseballwon.com, all rights reserved
Only 124 Days Until Pitchers and Catchers Report
slugger@baseballwon.com
© 2009 Baseballwon.com, all rights reserved
18
Expected Value of Return on Investment
UNDERDOG
FAVORITE
(as a function of probability of winning {P(w)} and Money Line)
Line / P(w)
-250
-245
-240
-235
-230
-225
-220
-215
-210
-205
-200
-195
-190
-185
-180
-175
-170
-165
-160
-155
-150
-145
-140
-135
-130
-125
-120
-115
-110
-105
-100
105
110
115
120
125
130
135
140
145
150
155
160
165
170
175
180
185
190
195
200
205
210
215
220
225
230
235
240
245
250
85%
19%
20%
20%
21%
22%
23%
24%
25%
25%
26%
28%
29%
30%
31%
32%
34%
35%
37%
38%
40%
42%
44%
46%
48%
50%
53%
56%
59%
62%
66%
70%
74%
79%
83%
87%
91%
96%
100%
104%
108%
113%
117%
121%
125%
130%
134%
138%
142%
147%
151%
155%
159%
164%
168%
172%
176%
181%
185%
189%
193%
198%
80%
12%
13%
13%
14%
15%
16%
16%
17%
18%
19%
20%
21%
22%
23%
24%
26%
27%
28%
30%
32%
33%
35%
37%
39%
42%
44%
47%
50%
53%
56%
60%
64%
68%
72%
76%
80%
84%
88%
92%
96%
100%
104%
108%
112%
116%
120%
124%
128%
132%
136%
140%
144%
148%
152%
156%
160%
164%
168%
172%
176%
180%
75%
5%
6%
6%
7%
8%
8%
9%
10%
11%
12%
13%
13%
14%
16%
17%
18%
19%
20%
22%
23%
25%
27%
29%
31%
33%
35%
38%
40%
43%
46%
50%
54%
58%
61%
65%
69%
73%
76%
80%
84%
88%
91%
95%
99%
103%
106%
110%
114%
118%
121%
125%
129%
133%
136%
140%
144%
148%
151%
155%
159%
163%
70%
-2%
-1%
-1%
0%
0%
1%
2%
3%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
14%
15%
17%
18%
20%
22%
24%
26%
28%
31%
34%
37%
40%
44%
47%
51%
54%
58%
61%
65%
68%
72%
75%
79%
82%
86%
89%
93%
96%
100%
103%
107%
110%
114%
117%
121%
124%
128%
131%
135%
138%
142%
145%
65%
-9%
-8%
-8%
-7%
-7%
-6%
-5%
-5%
-4%
-3%
-3%
-2%
-1%
0%
1%
2%
3%
4%
6%
7%
8%
10%
11%
13%
15%
17%
19%
22%
24%
27%
30%
33%
36%
40%
43%
46%
49%
53%
56%
59%
63%
66%
69%
72%
75%
79%
82%
85%
88%
92%
95%
98%
102%
105%
108%
111%
115%
118%
121%
124%
128%
60%
-16%
-16%
-15%
-14%
-14%
-13%
-13%
-12%
-11%
-11%
-10%
-9%
-8%
-8%
-7%
-6%
-5%
-4%
-3%
-1%
0%
1%
3%
4%
6%
8%
10%
12%
15%
17%
20%
23%
26%
29%
32%
35%
38%
41%
44%
47%
50%
53%
56%
59%
62%
65%
68%
71%
74%
77%
80%
83%
86%
89%
92%
95%
98%
101%
104%
107%
110%
55%
-23%
-23%
-22%
-22%
-21%
-21%
-20%
-19%
-19%
-18%
-18%
-17%
-16%
-15%
-14%
-14%
-13%
-12%
-11%
-10%
-8%
-7%
-6%
-4%
-3%
-1%
1%
3%
5%
7%
10%
13%
15%
18%
21%
24%
26%
29%
32%
35%
37%
40%
43%
46%
48%
51%
54%
57%
59%
62%
65%
68%
70%
73%
76%
79%
81%
84%
87%
90%
92%
© copyright 2009, Baseballwon.com,LLC, all rights reserved
50%
-30%
-30%
-29%
-29%
-28%
-28%
-27%
-27%
-26%
-26%
-25%
-24%
-24%
-23%
-22%
-21%
-21%
-20%
-19%
-18%
-17%
-16%
-14%
-13%
-12%
-10%
-8%
-7%
-5%
-2%
0%
2%
5%
7%
10%
12%
15%
17%
20%
22%
25%
27%
30%
32%
35%
37%
40%
42%
45%
47%
50%
52%
55%
57%
60%
62%
65%
67%
70%
72%
75%
45%
-37%
-37%
-36%
-36%
-35%
-35%
-35%
-34%
-34%
-33%
-33%
-32%
-31%
-31%
-30%
-29%
-29%
-28%
-27%
-26%
-25%
-24%
-23%
-22%
-20%
-19%
-18%
-16%
-14%
-12%
-10%
-8%
8%
-6%
-3%
-1%
1%
3%
6%
8%
10%
12%
15%
17%
19%
21%
24%
26%
28%
30%
33%
35%
37%
39%
42%
44%
46%
48%
51%
53%
55%
57%
40%
-44%
-44%
-43%
-43%
-43%
-42%
-42%
-41%
-41%
-40%
-40%
-39%
-39%
-38%
-38%
-37%
-36%
-36%
-35%
-34%
-33%
-32%
-31%
-30%
-29%
-28%
-27%
-25%
-24%
-22%
-20%
-18%
18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
32%
34%
36%
38%
40%
35%
-51%
-51%
-50%
-50%
-50%
-49%
-49%
-49%
-48%
-48%
-48%
-47%
-47%
-46%
-46%
-45%
-44%
-44%
-43%
-42%
-42%
-41%
-40%
-39%
-38%
-37%
-36%
-35%
-33%
-32%
-30%
-28%
28%
-27%
-25%
-23%
-21%
-20%
-18%
-16%
-14%
-13%
-11%
-9%
-7%
-6%
-4%
-2%
0%
1%
3%
5%
7%
8%
10%
12%
14%
15%
17%
19%
21%
22%
30%
-58%
-58%
-58%
-57%
-57%
-57%
-56%
-56%
-56%
-55%
-55%
-55%
-54%
-54%
-53%
-53%
-52%
-52%
-51%
-51%
-50%
-49%
-49%
-48%
-47%
-46%
-45%
-44%
-43%
-41%
-40%
-39%
39%
-37%
-36%
-34%
-33%
-31%
-30%
-28%
-27%
-25%
-24%
-22%
-21%
-19%
-18%
-16%
-15%
-13%
-12%
-10%
-9%
-7%
-6%
-4%
-3%
-1%
0%
2%
3%
5%
25%
-65%
-65%
-65%
-64%
-64%
-64%
-64%
-63%
-63%
-63%
-63%
-62%
-62%
-61%
-61%
-61%
-60%
-60%
-59%
-59%
-58%
-58%
-57%
-56%
-56%
-55%
-54%
-53%
-52%
-51%
-50%
-49%
49%
-48%
-46%
-45%
-44%
-43%
-41%
-40%
-39%
-38%
-36%
-35%
-34%
-33%
-31%
-30%
-29%
-28%
-26%
-25%
-24%
-23%
-21%
-20%
-19%
-18%
-16%
-15%
-14%
-13%
20%
-72%
-72%
-72%
-71%
-71%
-71%
-71%
-71%
-70%
-70%
-70%
-70%
-69%
-69%
-69%
-69%
-68%
-68%
-68%
-67%
-67%
-66%
-66%
-65%
-65%
-64%
-63%
-63%
-62%
-61%
-60%
-59%
59%
-58%
-57%
-56%
-55%
-54%
-53%
-52%
-51%
-50%
-49%
-48%
-47%
-46%
-45%
-44%
-43%
-42%
-41%
-40%
-39%
-38%
-37%
-36%
-35%
-34%
-33%
-32%
-31%
-30%
15%
-79%
-79%
-79%
-79%
-78%
-78%
-78%
-78%
-78%
-78%
-78%
-77%
-77%
-77%
-77%
-76%
-76%
-76%
-76%
-75%
-75%
-75%
-74%
-74%
-73%
-73%
-73%
-72%
-71%
-71%
-70%
-69%
69%
-69%
-68%
-67%
-66%
-66%
-65%
-64%
-63%
-63%
-62%
-61%
-60%
-60%
-59%
-58%
-57%
-57%
-56%
-55%
-54%
-54%
-53%
-52%
-51%
-51%
-50%
-49%
-48%
-48%
AMERICAN Lines: Winning Probabilities and Conversions
Favorite
American
P(w)
Decimal
-100
-105
-110
-115
-120
-125
-130
-135
-140
-145
-150
-155
-160
-165
-170
-175
-180
-185
-190
-195
-200
-205
-210
-215
-220
-225
-230
-235
-240
-245
-250
-255
-260
-265
-270
-275
-280
-285
-290
-295
-300
-305
-310
-315
-320
-325
-330
-335
-340
-345
-350
50.0%
51.2%
52.4%
53.5%
54.5%
55.6%
56.5%
57.4%
58.3%
59.2%
60.0%
60.8%
61.5%
62.3%
63.0%
63.6%
64.3%
64.9%
65.5%
66.1%
66.7%
67.2%
67.7%
68.3%
68.8%
69.2%
69.7%
70.1%
70.6%
71.0%
71.4%
71.8%
72.2%
72.6%
73.0%
73.3%
73.7%
74.0%
74.4%
74.7%
75.0%
75.3%
75.6%
75.9%
76.2%
76.5%
76.7%
77.0%
77.3%
77.5%
77.8%
2.000
1.952
1.909
1.870
1.833
1.800
1.769
1.741
1.714
1.690
1.667
1.645
1.625
1.606
1.588
1.571
1.556
1.541
1.526
1.513
1.500
1.488
1.476
1.465
1.455
1.444
1.435
1.426
1.417
1.408
1.400
1.392
1.385
1.377
1.370
1.364
1.357
1.351
1.345
1.339
1.333
1.328
1.323
1.317
1.313
1.308
1.303
1.299
1.294
1.290
1.286
© 2009 BaseballWon
Underdog
Hong Kong Indonesia Malay
1.000
0.952
0.909
0.870
0.833
0.800
0.769
0.741
0.714
0.690
0.667
0.645
0.625
0.606
0.588
0.571
0.556
0.541
0.526
0.513
0.500
0.488
0.476
0.465
0.455
0.444
0.435
0.426
0.417
0.408
0.400
0.392
0.385
0.377
0.370
0.364
0.357
0.351
0.345
0.339
0.333
0.328
0.323
0.317
0.313
0.308
0.303
0.299
0.294
0.290
0.286
-1.00
-1.05
-1.10
-1.15
-1.20
-1.25
-1.30
-1.35
-1.40
-1.45
-1.50
-1.55
-1.60
-1.65
-1.70
-1.75
-1.80
-1.85
-1.90
-1.95
-2.00
-2.05
-2.10
-2.15
-2.20
-2.25
-2.30
-2.35
-2.40
-2.45
-2.50
-2.55
-2.60
-2.65
-2.70
-2.75
-2.80
-2.85
-2.90
-2.95
-3.00
-3.05
-3.10
-3.15
-3.20
-3.25
-3.30
-3.35
-3.40
-3.45
-3.50
1.000
0.952
0.909
0.870
0.833
0.800
0.769
0.741
0.714
0.690
0.667
0.645
0.625
0.606
0.588
0.571
0.556
0.541
0.526
0.513
0.500
0.488
0.476
0.465
0.455
0.444
0.435
0.426
0.417
0.408
0.400
0.392
0.385
0.377
0.370
0.364
0.357
0.351
0.345
0.339
0.333
0.328
0.323
0.317
0.313
0.308
0.303
0.299
0.294
0.290
0.286
American
P(w)
Decimal
100
105
110
115
120
125
130
135
140
145
150
155
160
165
170
175
180
185
190
195
200
205
210
215
220
225
230
235
240
245
250
255
260
265
270
275
280
285
290
295
300
305
310
315
320
325
330
335
340
345
350
50.0%
48.8%
47.6%
46.5%
45.5%
44.4%
43.5%
42.6%
41.7%
40.8%
40.0%
39.2%
38.5%
37.7%
37.0%
36.4%
35.7%
35.1%
34.5%
33.9%
33.3%
32.8%
32.3%
31.7%
31.3%
30.8%
30.3%
29.9%
29.4%
29.0%
28.6%
28.2%
27.8%
27.4%
27.0%
26.7%
26.3%
26.0%
25.6%
25.3%
25.0%
24.7%
24.4%
24.1%
23.8%
23.5%
23.3%
23.0%
22.7%
22.5%
22.2%
2.000
2.050
2.100
2.150
2.200
2.250
2.300
2.350
2.400
2.450
2.500
2.550
2.600
2.650
2.700
2.750
2.800
2.850
2.900
2.950
3.000
3.050
3.100
3.150
3.200
3.250
3.300
3.350
3.400
3.450
3.500
3.550
3.600
3.650
3.700
3.750
3.800
3.850
3.900
3.950
4.000
4.050
4.100
4.150
4.200
4.250
4.300
4.350
4.400
4.450
4.500
C:\Baseball\2009\LineConversion.xls
Hong Kong Indonesia
1.000
1.050
1.100
1.150
1.200
1.250
1.300
1.350
1.400
1.450
1.500
1.550
1.600
1.650
1.700
1.750
1.800
1.850
1.900
1.950
2.000
2.050
2.100
2.150
2.200
2.250
2.300
2.350
2.400
2.450
2.500
2.550
2.600
2.650
2.700
2.750
2.800
2.850
2.900
2.950
3.000
3.050
3.100
3.150
3.200
3.250
3.300
3.350
3.400
3.450
3.500
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
1.55
1.60
1.65
1.70
1.75
1.80
1.85
1.90
1.95
2.00
2.05
2.10
2.15
2.20
2.25
2.30
2.35
2.40
2.45
2.50
2.55
2.60
2.65
2.70
2.75
2.80
2.85
2.90
2.95
3.00
3.05
3.10
3.15
3.20
3.25
3.30
3.35
3.40
3.45
3.50
Malay
1.000
-0.952
-0.909
-0.870
-0.833
-0.800
-0.769
-0.741
-0.714
-0.690
-0.667
-0.645
-0.625
-0.606
-0.588
-0.571
-0.556
-0.541
-0.526
-0.513
-0.500
-0.488
-0.476
-0.465
-0.455
-0.444
-0.435
-0.426
-0.417
-0.408
-0.400
-0.392
-0.385
-0.377
-0.370
-0.364
-0.357
-0.351
-0.345
-0.339
-0.333
-0.328
-0.323
-0.317
-0.313
-0.308
-0.303
-0.299
-0.294
-0.290
-0.286
