Wednesday, December 27, 2006

Icing the kicker 

NFL coaches commonly call a time out when the game is on the line and the opponents are setting up a last-minute field goal attempt. They are "icing the kicker," attempting to disrupt his preparation prior to the crucial play. But does it work? There are reasons to be skeptical. Players know that such a time out is highly probable, and should thus know what's coming. The time out doesn't fool anybody, and kickers are highly specialized professionals that learn how to make plays in the face of fierce opposition. A time out is not very fierce opposition.

On the other hand, kickers are creatures of habit. They fine tune a routine and presumably employ that routine for the typical field goal; extra time takes them out of this routine, even if they know what's in store. My personal view (words to suggest that this next idea may be really screwed up) is that kicking a football is similar to hitting a golf ball. The less you think about either, the more likely you are to take a swinging leg or club and actually make solid contact with an oddly placed and perhaps oddly shaped object on the ground.

What do the data say? Here's Science News' summary of a recent analysis of icing by Scott Berry and Craig Wood in Chance.
Berry and Wood analyzed data about field goal attempts during the 2002 and 2003 NFL seasons (including playoffs). They recorded the kicker, the length of the kick, the score of the game, the time left in the game, and whether a timeout was called by the defense before the kick. They even noted whether the field was grass or artificial turf and the weather conditions (sun, clouds, rain, snow, average wind speed, temperature--—unless the games were indoors).

In these two seasons, there were 52 different field goal kickers, combining for a total of 2,003 attempts. Of these kicks, 1,565 (78.1 percent) were successful.

Berry and Wood then looked at what they defined as "pressure" kicks--—those that occurred with 3 minutes or less remaining in the game (or overtime) and would create a lead or a tie for the team attempting the kick.

There were 139 such pressure kicks, and 101 (73 percent) were successful. The defense called a timeout 38 times before the pressure kick, and 24 (63 percent) of these kicks succeeded.
Berry and Wood also estimate a probability model which allows for the influence of factors like weather to be captured. The results appear sensible, and the "icing effect" remains.
A kick made indoors is more likely to be successful. Clouds also have a small beneficial effect on kicks. Rain or snow, on the other hand, reduces the chances of success. High winds also reduce the probability of success, but not as much as rain or snow.

In pressure situations, the odds of success change very little (a mean decrease of 1.8 percent). However, icing the kicker in such a situation has a pretty strong negative effect.

Using their model, Berry and Wood calculate that, for an average kicker, the estimated probability of a successful 40-yard kick in sunny weather is 0.759. The estimated probability under the same conditions for an average kicker who has been iced is 0.659. "Reducing the probability of a successful kick from 0.759 to 0.659 is a very important difference," Berry and Wood report.
I concur on the magnitude - it's very large, and suggests that icing is a critical strategy. There aren't many "free calls" that a coach can make that increase the probability of winning a game by as much as 0.1.

I have two quick observations. I've often wondered whether a mixed strategy is the appropriate approach here - i.e. call a time out with probability of, say 0.65. This should put the thought in the kickers mind that he might or might not have to execute, rather than the near certainty that he will be iced. But 0.1 is perhaps too large to give up in return for the benefits of additional uncertainty. If there are diminishing returns to icing, then perhaps the spot to play a mixed strategy would be when you have two or three time outs left. Finally, the sample size is small for my tastes - the effect is identified from just 139 "pressure" kicks, and with 30+ idiosyncratic kickers in the league, 139 seems a tad small. I'd like to see the sample expanded to a decade's worth of games.

Thanks to Blake Linney for the link.

Thursday, December 21, 2006

The world's greatest cricketer retires 

The Australian spin bowler Shane Warne announced his retirement from international cricket yesterday. His 699 wickets (batsmen retired) in test matches (5 day games) is the highest in the history of the game. But more importantly, perhaps, he is credited with changing the future of the game. He is a slow bowler (pitcher), meaning he bowls at around 55 mph rather than the 80-95+mph of the fast bowler. He relies on spinning the ball (his particular form of the art is called leg spin), which he does prodigiously, and most of the world's batsmen have found him impossible to play for the last 15 years.

Since being introduced in the 1960s, cricket has been increasingly dominated by the one-day version of the game, which has more spectator and TV appeal. The traditional 5-day test match version of the game was in decline. Warne's bowling, however, is credited with increasing the probability that a 5-day match would finish in a result rather than a draw, and thus reviving interest. If this is true, it will be interesting to see if his retirement is a set-back for the 5-day game.

Another reflection prompted by his retirement is the incidence of record breaking in cricket. In recent years a lot of cricket records have been broken simply because there is a lot more cricket being played. This in part reflects improved transportation (for what is truly a global game in scope), but more importantly increased space in TV schedules and competition for rights. Warne's record is likely to be beaten in the next year or two by another spin bowler, Muttiah Muralitharan. The Sri Lankan has been far more controversial on the pitch, with frequent claims that his bowling does not conform to the rules; controvery over Warne had more to do with his colourful private life, although he also served a one-year ban for taking banned substances. However, while modern players dominate all the aggregates, previous generations still dominate most of the averages. A comparison between cricket and baseball might be interesting here, given some of the record breaking feats in recent baseball times.

Rules rules rules 

Read Joshua Robinson's story about Brian Cusworth, a 7 foot center on Harvard's basketball team. Brian was a slow-to-develop player who has come good, and may now have professional options in Europe. But he suffered some injuries early in his career and withdrew from college for a semester. The Ivy League allows an injured player to "seek permission to play during a fifth year if there is a compelling academic reason to stay. At Harvard, however, students have only eight semesters to earn their degrees..."

The result: Cusworth, the team's leading scorer and rebounder, will play his last game on Jan. 12, just two games into the Ivy League's conference schedule. If he were not enrolled this fall, rules dictate that he couldn't practice with the team, rendering him less valuable for the spring. But if he is enrolled this semester he must graduate this semester to earn the Harvard degree, which he will, thereby ending his college basketball career. If Brian was at Clemson, we could drop him into a goofy graduate program and the media would gush over the graduate-student-athlete, the commitment to academics on display, blah blah blah. But at Harvard, apparently, the game be damned: graduate and get outta here!

Monday, December 18, 2006

Voluntarily Homeless: The Texas A&M Edition 

Here's a story about Ben Bitner, a football player for Texas A&M:

After a dispute with a roommate over bills, Bitner, a nonscholarship junior defensive back for A&M, moved out of a house in College Station following the Aggies' appearance in the Jan. 1, 2005, Cotton Bowl.

For a year and a half, Bitner didn't have a place to stay. He lived under creek bridges on the A&M campus, in a fort he built in the woods near the school's golf driving range and anywhere he could stretch his hammock or lay his sleeping bag around Aggieland.

When he wasn't finding shadowy crannies to catch some shuteye — "Out of sight, out of mind," he said — Bitner was attending classes as a history major and excelling on the Aggies' scout team. The 5-foot-3, 160-pounder from Round Rock has played in two games this year as a member of the kickoff squad.

He did it to save money!
"He's paying his own way through college, and he figured it was a good way to save money. It was just ... Ben."
Now THAT's a tough kid!

HT to Tigerboard

Rational Irrationality in Professional Football 

A few years ago David Romer – and economist at UC Berkeley – posted a paper on-line examining the decisions NFL coaches made on fourth down. Romer’s paper [Do Firms Maximize? Evidence From Professional Football], which has since been published in The Journal of Political Economy (April, 2006), found via an examination of expected benefits and costs that NFL coaches were not making optimal decisions. Specifically, NFL teams should be going for it more often on fourth down, rather than punt or attempt field goals.

In the December 18 issue of ESPN the Magazine, Michael Lewis – author of Moneyball and The Blind Side – examines the reaction to this article in the NFL. Since this article has been brought to the attention of decision-makers in the NFL Lewis finds that coaches are actually going for it less often on fourth down. In 2001 the average team went for it on fourth down 15.1 times per season. In 2005 the average team only went for it 14.5 times. So NFL coaches are told by Romer that it makes more sense to go for it more frequently on fourth down, and the response is to go for it a bit less often. What explains this reaction?

Lewis first asks if Romer is simply wrong, but concludes that this is not the case (and I agree). Lewis also wonders if NFL coaches simply can’t understand the complexity of Romer’s argument. This is a possibility, but Lewis argues the coaches are more than capable of understanding complex arguments. After all, just running an NFL team – as anyone associated with the Detroit Lions has learned in recent years – is quite complex and difficult.

No, Lewis thinks Romer is right and NFL coaches understand his arguments. For Lewis, the reason why coaches fail to heed Romer’s wisdom is that coaches do not wish to undermine their reputation in the coaching fraternity. As Lewis puts it “Go for it on fourth down more often than any other coach, and you not only set yourself apart from your peers, but you call into question their intelligence. If your decision doesn’t pay off – if you go for it routinely and your team fails – you’ll stand accused of malpractice.”

Let’s say you are a new head coach and you believe what Romer is saying. So faced with fourth down you frequently try for the first down. But Romer is not saying you will always succeed. It's possible that you will follow this strategy and your team will frequently fail. This is especially true if you have a bad team, which rookie head coaches are often given.

As you fail on fourth down you lose more often. Other coaches look at your decision-making and conclude that your team is not just losing because you lack playing talent, but also because you as a coach are not making the decisions that will put your team in the best possible position to win.

When a head coach is hired he begins counting the days until he is ultimately fired. When the head coach is fired, he typically is hired by another head coach to serve on his staff. But if you have demonstrated that you make decisions contrary to the league’s conventional wisdom, you jeopardize your future employment. Consequently it might be rational for a head coach to lower his chances to win today – by not following Romer’s advice – so the can further his chances of gaining employment in the future. In sum, it might be rational across time to be a bit irrational on game day.

Aaron Schatz and Jim Armstrong of in the same issue of ESPN the Magazine looked at how the fourth down decision varied across head coaches from 1997 to the 12th week of 2006. They found that Bill Parcells, Bill Belichick, Bill Cowher, Marty Schottenheimer, and Mike Shanahan were most likely to go for it on fourth down. Nick Saban, Sean Payton, Gary Kubiak, Rod Marinelli, and Scott Linehan were the least likely to go for it. The first group includes coaches who have won the Super Bowl, or in the case of Schottenheimer, had a long history of success. The latter group was comprised of coaches new to the NFL.

One would expect a coach with an established reputation to be less concerned about flouting conventional wisdom. Younger coaches, though, are far less secure in their futures. Consequently it may be most rational for these coaches to be the most conservative on a team’s most conspicuous decision.

To test this idea one should look at the decisions of Parcells, Belichick, Cowher, Schottenheimer, and Shanahan before each found success in the NFL. Were these coaches more conservative when they were younger? I would expect that we will find a statistical relationship between coaching tenure and going for it on fourth down.

Of course, some will argue that these coaches are successful because they often heed the advice of Romer. In other words, these coaches became successful by taking risks. This may indeed be true. But if that is the case, then we are once again faced with the puzzle: Why don’t coaches go for it on fourth down more often?

Saturday, December 16, 2006

What's With No Saturday Football? 

Something is wrong. For the past two Saturdays, Ms. Eclectic and I have been all primed to watch some football on television, and what do we get? Nothing during the afternoons, and only one evening game (on the NFL network!).

This state of affairs strikes me as both deplorable and unusual. I know lots and lots of people have spent the past two Saturday afternoons Christmas shopping and wouldn't have been home to watch football on television even if it had been available. But surely the market for tv football on early December Saturday afternoons is large enough to warrant showing at least one NCAA or NFL game. What happened?

Have these time slots traditionally belonged to the NCAA? Are those television slots not being used for football now because of the changes put in place when the Bowl Championship Series was initiated? Well, if so, why weren't schedules changed? Surely those are valuable television time slots that could have been filled by someone.

Were the transaction costs too high? Were the property rights poorly defined? What happened?

Beat The Pre-Season Poll, Win A Beer 

Prior to the beginning of the BCS chase, a posting by Dave Berri prompted me to offer the following bet: I’d buy anybody a beer that sent me a Top 25 that beat the USAToday Pre-Season poll as a predictor of the final BCS Standings. There were five takers: Dennis Coates (Economics, UM-Baltimore County and a poster here at The Sports Economist), Steve Winkler (financial analyst for The Oklahoman), Nick Evans (Associate, Parliamentary Public Law and Planning Dept.), Jon Russell (ConAgra Foods), and Burt Monroe (Political Science, Penn State).

By mutual agreement, the six of us have decided that the bet has run its course. The final BCS Standings prior to post-season play were compared to the offerings of the five competitors named above, using two scoring devices. One is the minimum of the actual ranking minus the pre-season ranking with an arbitrary value for picks that didn’t make it at all. The other is an accuracy measure devised by Steve (contact him if you want an explanation). And the winner is…

Burt Monroe, sort of. Burt tied the USAToday Pre-Season poll by Steve's "accuracy measure" and beat the poll 197-207 (by 5%) using the "score minimization measure." I’m not sure what we discovered, relative to Dave’s point that pre-season polls have no information content, other than this: The USAToday Pre-Season Poll beat four out of five interested observers.

Here’s to you, Burt. I hope you'll be in Seattle at the WEAI meetings, so I can buy you one.

Click for an MSExcel file with the results.

Friday, December 15, 2006

Sports and Econtalk 

Not long ago I did my second Econtalk podcast (on the Moneyball hypothesis) with Russ Roberts of George Mason. At the time, Russ told me that our first discussion was quite popular, ranking second behind his August podcast with Milton Friedman. Wow! These were certainly entertaining conversations to take part in, and I hope you visit Econtalk to have a listen. I imagine many of you might put off listening to me in favor of Barro, Engerman, Glaeser, and so on, but that's just the measure of the quality discussion that exists in the Econtalk archive.

Econtalk has been nominated for the 2006 Weblog Awards, a richly deserved recognition. Right now Russ is nipping on the heels of second place in the competition, and with a push from readers of The Sports Economist, he could make it all the way to the top. I urge you to go to the awards page and vote for Econtalk, and also to listen to the great content that Russ has put together over the past year. Voting ends today, so get your vote in now!

Thursday, December 14, 2006

The NBA & Player Development 

According to Pete Thamel's story in today's NY Times, the NBA may soon open a "European-style basketball academy" to develop American basketball talent.
Six months after N.B.A. Commissioner David Stern called for reform in the American youth basketball system, he said a collaborative effort to bring about change was making incremental progress. David Stern, the N.B.A. commissioner, said an academy for young, elite players could be opened by 2008.

Part of that effort took a step forward yesterday when Stern and Adam Silver, the N.B.A.'’s deputy commissioner, toured IMG Academies in Florida for ideas on how to create a European-style basketball academy for young, elite American players. IMG has trained and educated top players in tennis, soccer and basketball for years.

In a telephone interview Friday, Stern said he could envision an academy opening by 2008. He said he liked setting "crisp dates" to "keep the process moving."

"We'’re not kidding around here," he said.

The idea for an academy came about because of lagging performances by the United States in international competition and, Stern said, because the American system has "exploited and exposed" talented players "all the way up."
I'm a bit puzzled by this. In European soccer, there is no draft, and competition for playing talent extends to talented youngsters who are many years from competing as professionals. This forces the top teams into training twelve-year old kids, investing in their education, and so on. The best clubs reportedly do a good job at it. At the national level, academies have been created for elite talent. The French system is credited with developing the talent which made the national team one of the best in the world the past decade.

So if the objective is to improve the national team, one can make a case for substantial investment in training elite talent. The return on investment would be success in international competition.

IMG presumably makes a handsome profit developing tennis players and the like. The expense is financed by parents and sponsors, fueled by the expected earnings of the elite talent they help develop.

But in the case of the NBA, it is not clear where the league will obtain a return on investment. Unlike European soccer clubs, the NBA is not forced by competition to invest in teenagers - the league benefits from omposing the draft. The NBA take the results of others' investments in player development, throughout the U.S. and the rest of the world. From this mostly decentralized model, the NBA has been able to put on an amazing display of basketball talent.

Perhaps the cost of an academy is so modest that the NBA can take a chance that its investment will trigger changes to a flawed system of player development. But that seems a remote possibility to me. And I don't see it increasing the level of skill on the floor of NBA games by a measurable degree. I may have blinders on, but my sense is that this endeavor has a Don Quixote-like aspect to it. What's in it for the NBA? Is David Stern tilting at windmills?

Tuesday, December 12, 2006

UFC Goes Bigtime 

Football, baseball, basketball, hockey -- the four "major" pro sports. Ok, NASCAR must be included and may have even be in second slot in overall popularity. Now I learn that "Ultimate Fighting" is in the mix. While channel surfing Sunday night, I ran across a 60 Minutes' segment on Mixed Martial Arts: A New Kind of Fight. Sure, I had noticed that ultimate fighting had become more visible, but, erroneously, I viewed it as in the backwater of American sports. A recent event in Anaheim turned out 17,000 spectators and 700,000 pay-per-viewers at $40 a pop. Here is part of the interview with one of the UFC partners [UFC website here]:
[Dana White] and his partners bought the UFC for $2 million. Asked what it's worth now, White says, "I don't know. A lot more than two million." "The smile on your face suggests maybe over 100 million, I'm guessing," Pelley asks. "Could be. Could be. Could be a billion. I don't know," White says. It seems plausible. The International Fight League just went public and it is valued at more than $150 million.
What changed UFC from illegal little sideshow into megabucks? Interestingly, a constitution, of sorts. When White and his partners took over, they outlawed the most dangerous moves like kicks to the groin, and started promoting the idea of combatants with "mixed martial arts" styles. The move gained legal sanctioning in 21 states but also seemed to legitimize the sport in the eyes of more customers. It seems that minimal constitutional government beats anarchy in the eyes of both state regulators and customers.

There are obvious moral issues that arise, and the 60 Minutes segment gave the UFC partners a decent opportunity to make their case. A reputable study of boxing versus UFC shows that UFC participants suffer fewer serious head or brain injuries. The mixing of combat styles reduces the head pounding. Going beyond the boxing comparison, UFC's White asked,
"What could be more violent than the NFL? ... broken arms, legs getting snapped in half, broken necks, what do you consider violent?"
He does have a point. I suppose one retort might be that these injuries are side effects, whereas in UFC beating the daylights out of each other is the objective.

Whether boxing or UFC, sports where the object is to pummel an opponent into quitting will always raise moral issues. Society is not ready to sanction fights to-the-death even where opponents voluntarily sign up. Whether it should or not, and how it should decide has occuppied the time of people like Jim Buchanan over the past 30 years and many before him from other perspectives. From my own personal perspective, I'm willing to grant that UFC is probably safer than boxing in terms of head injuries, but there is something disturbing about it. Violence in sports especially as it seems to become a major driver of customer interest does concern me. Hockey's toleration of fighting or the NFL's increasingly slow whistles permitting more abuse of ball carriers because of the fan appeal may not be exactly on a par with the Rollerball (the 1970s film) level of violence and decadence, but it leans in that direction. However, I digress -- this is, after all, the Sports Economist, not the Sports Moral Philosopher!

Sweet deal 

In a post a couple of days ago, I noted the wonderful benefits to the City of Baltimore produced by the Baltimore Ravens, as reported in the Baltimore Sun. Reading that article, one is left with the impression that the local newspaper is little more than an arm of the Ravens public relations department. The Baltimore Examiner will not be accused of that. Here's a recent editorial they ran on the Ravens practice facility.

Since occupancy, it (the Ravens) has been required to pay “one-twelfth of the county portion of the adjusted real property tax which would be due in the premises, not to exceed $300,000,” according to its lease, signed in 2002. It also must pay a 3 percent rent increase every year after the facility is built. One-twelfth of the adjusted real property tax is still not a bad deal. That works out to $25,750 per month — $309,000 per year in 2006.
I sure wish the county would charge me one-twelth of my property tax.

What does the team provide in return? The county is allowed to use a portion of the facility at least three times per year for public functions, all of which must be mutually agreed upon. It is also supposed to spend $200,000 on a lighted football field for public use that has not yet materialized, according to a Dec. 2 Examiner report.

Wow. The county gives the team property tax breaks and lots of free infrastructure and the county gets to use the facility three times, with the permission of the franchise, and a lighted football field that hasn't been built. The county sure negotiated a sweet deal with the team.

Saturday, December 09, 2006

Football franchises - the gift that keeps on giving 

This morning's Baltimore Sun had as it's cover story "Many win if Ravens do". I know readers of this blog will enjoy the story, as we are all well aware of the enormous benefits of professional sports franchises on jobs and incomes.

Here is my sure-to-be unpublished letter to the editor in response to the article:

I read with interest the article on the Ravens' impact on local business activity. It seems that Baltimore Ravens fans have several reasons to celebrate the team. One reason is that were it not for the Ravens success this year, many area residents would have cold heads and bare chests. But because the team is winning, area residents are buying hats and shirts.

Of course, that benefit is relatively small compared to the effects of the Ravens' presence in Baltimore on the area's hunger problem. From reading the article, I learned that many people in Baltimore would not think to eat or drink on Sundays were it not for the Ravens playing in town.

I am also pleased to learn that WBAL radio and 98Rock are able to charge more for ad time than they were last year and are getting more advertising than last year, when they didn't broadcast Ravens games. I am sure that the stations that had the broadcast rights last year are equally happy for the increased advertising experienced by WBAL radio and 98Rock. They were probably just so overcome with joy for their brother broadcasters that they couldn't speak when asked to comment.

So, thanks Ravens, for all the benefits you bring to our city.

One further point the article makes is quite interesting. The booth in the stadium that sells state lottery tickets has never done better. That's surely good news, as sales to football game patrons are probably the least regressive lottery sales there are. And, even better, the revenues from the lottery are used to pay off the bonds that finance the stadium. How's that for a well-designed user fee?!

Thursday, December 07, 2006

Brian Davis' Grizzly Bid 

The story of ex-Duke basketballer Brian Davis' bid to purchase the Memphis Grizzlies has been brewing for a while. Grizzlies blogs started mentioning it over the summer. On November 27th, The Wall Street Journal ran a story (subscription required). Davis' group, including Christian Laettner along with others, reportedly offered $252 million for a 70% stake but seems to be undercapitalized and relying heavily on debt and higher future revenues with a better strategy. The WSJ article focuses primarily on Davis background and personal initiative -- very admirable stuff -- as well as his relative lack of personal assets to get in this game with a team losing money. Mark Cuban offers this advice: "It takes a lot of money, nothing more or less." A Monday follow-up in the WSJ noted that the current minority owners have passed on their option to match the offer.

SportsBiz has been on the story for a while and provides links to more detailed stories running in the Memphis Commercial-Appeal. These sources cite a $29 million loss for the team last year. The Davis group plan (at least what is known) boils down to reducing payroll, doing a better job of finding cheaper, better talent, and energizing the African-American community in Memphis to follow the team more. Of this plan, Mark at SportzBiz says:
If they are banking on attendance to pull the team out of financial difficulty and are conceding that they have tapped out the corporate community, this team is in real trouble. The answer is not in African-American attendance and a modestly lower (the memo speaks to a 15% reduction) payroll. The answer is relocation. Memphis is a market that won't work. Of course, that is what a lot of people told the NBA when Heisley first wanted to move the team there.
I'm inclined to agree with the analysis from Sportsbiz -- the "fundamentals" don't seem to be very good in Memphis. It has an MSA population of 1.2 million MSA, placing it above only Salt Lake City (and now New Orleans) among NBA cities. Its growth rate is low compared to most other metro areas, its geography places the arena at the very western edge rather than near the center of the metro area, and its income base is relatively low. The Griz average 15,000 per game at the $250 million FedEx Forum (new in 2004), a low attendance by NBA standards. However, even at capacity, they could average only 3000 more, generating maybe $5 million more in (direct) revenue. Coupled with maybe $15 million in salary savings, they are still in the hole (of course, that's treating the "loss" figure as a meaningful figure which is always tenuous.)

With that said, I'm not sure why the league shouldn't permit Davis' group to go ahead (if creditors are ok with it). Sports provides plenty of examples of successful "entrepreneurship" that seemed to be bad ideas to many including a majority of owners such as night baseball, radio and TV broadcasts of baseball, cable telecasts, and some expansion episodes (e.g., NFL passing on what came to be AFL cities). If a proposal must must pass a 2/3 or 3/4 vote of owners, then a relatively risk averse owner gets to decide -- not a mechanism for promoting innovative ideas. This situation is a bit different in that owners don't seem to be as picky about transfer of ownership issues as they are some other matters.

Wednesday, December 06, 2006

Billy Beane, a Celebrity in Finance 

Oakland A's general Manager Billy Beane has become a star attraction on Wall Street, writes John Authers in the Financial Times.
[A]t T. Rowe Price's annual investment symposium in Baltimore last month, he took top billing over an array of investment analysts and historians, and kept his audience -- mostly of fund managers and their clients -- rapt with attention.

Beane's great contribution to baseball -- he is quick to admit -- has been to apply to it techniques that were first honed by investors on Wall Street. Now, to his evident enjoyment, Wall Street is interested by the lessons it can learn from the world of professional sports. Beane's decisions on hiring players -- and those of an increasing number of his competitors -- are based on quantitative evaluation techniques, aimed at finding market mispricing. He freely admits that he has borrowed liberally from the techniques of value investing and arbitrage. To the extent that they work, people such as the fund managers at T. Rowe Price want to know about them.
The story describes mostly well-covered ground, albeit from the perspective of a writer well versed in the world of financial markets. Thanks to Scott Baier for the link.

About suffering they were never wrong,The Old Masters 

Tuesday’s crushing defeat of England by Australia demonstrated exactly why cricket fans love the game and the rest of the world is bemused. The game lasted a full five days (with about 7 hours in the field on each day). In the first innings (out of two per side) England scored 551 runs without all of their batsmen taking a turn (electing not to continue with batting being a sign of an impregnable position). The Australians almost equalled this with a score of 513 in their first innings. All this had taken nearly 4 days, so the chances of a result on the final day were slim, the most likely outcome a draw. However, on the final day all of England’s batsmen were all out cheaply and thus Australia were set a target of 168 runs in two hours. They achieved this with a spectacular display of batting. There were a total of 2636 balls bowled (pitched) in the game: had Australia failed to reach the target score within a further 19 balls the fifth day’s play would have ended and the game would have been declared a draw. England have now lost the first two matches in a series of five and look set to lose the Ashes, the symbolic trophy that has been contested for last 130 years.

This national tragedy was reported as the first item on the morning BBC News in the UK, so I wondered if there was any evidence of a stock market effect, particularly given the unexpected nature of the result going from the fourth to the fifth day. In Australia the S&P ASX 200 was up 0.74% on Wednesday’s trading, while the FTSE 100 in London was up 0.6% on Tuesday (the Australian market was closed Tuesday when the game ended, while London was just opening). So although not many city bankers appear to have thrown themselves out of the window, investors on the Australian market seem to have been a bit more bullish yesterday. Moreover, if you think Europe is the relevant comparison for the London market, then the DAX (Germany) was up 1.23% and the CAC40 (France) was up 1.2%, suggesting less optimism in London. However, London is also very closely tied to the Americans, who were clearly devastated by the result, given that the NASDAQ managed a pitiful 0.16% gain. On the other hand, maybe Auden was right.

Tuesday, December 05, 2006

Foreign Ownership in the English Premier League 

Of the 20 EPL teams, 6 are now controlled by foreigners:
Aston Villa
Randy Lerner (America)
Roman Abramovich (Russia)
Mohamed Fayed (Egypt)
Manchester United
Malcolm Glazer (America)
Alexandre Gaydamak (Israel)
West Ham
Eggert Magnusson (Iceland)
That's from a discussion of Magnusson's plans for West Ham. Fayed and Ambramovich, who made big splashes with their investments several years ago (significantly improving the performance of their clubs) are now the old boys in the league of foreign owners. This is a growing trend. Up next on the block is Liverpool, apparently to the Dubai International Capital group, for £250m plus a £200m commitment for a new stadium.

The new money is funding investment in upstarts like Portsmouth, previously dormant clubs like Aston Villa and West Ham, and of course the ultimate big-spenders in high-flying Chelsea. Survival, let alone being competitive in the EPL will be more challenging as a result, and more expensive due to the pressure on player wages.

Other owners are complaining, as good 'ol boy, would-be cartel members should. Bolton's chairman was on the EPL Preview Show last week issuing concerns over the flood of foreign money. In addition, Watford's manager and Wigan's chairman have issued calls for a salary cap. These are interesting times, where (as I've said before) the organizational stucture of one of the world's great leagues is up for grabs.

Monday, December 04, 2006

The "I Don't Know" Argument 

Generally I teach The Economics of Sports in the Winter Quarter at Cal-State Bakersfield. The quarter begins the first week of January or right around the BCS championship game in college football. Given the students focus on college football, I always ask a question like the following on the first day of class: Who is better – Michigan or Florida?

A few years back this question asked about USC and Auburn. In 2004 the question was about USC and Louisiana State.

Students take this question and return the second day of class with their answers. Although the teams I ask about change each year, the answer I am looking for is the basically same. Because college football teams only play a small sample of games, and because the sample for each of these contenders is generally completely different, it is not possible to look at the data and provide a definitive answer.

Students do not typically offer this answer. Rather students offer impassioned defenses of one team or the other. And when these are turned in I go over the basic problem with the student’s approach. In analysis the size of the sample matters. And the sample we see in college football is not sufficient for us to know whether Michigan or Florida is better or worse.

For members of the sports media, though, the “I Don’t Know” answer is probably not going to work. Just saying “I Don’t Know” will not fill in many column inches or take up much air time. So there is a tendency for people to take a stand.

And as a fan of Michigan, I am more than willing to follow suit. I grew up in Michigan and I "know" the Wolverines did not somehow get worse than Florida these last two weeks. In fact, if I ask this question of my future students in the Economics of Sports, I think students better be telling me that Michigan is much better than Florida.

Chicago Colleagues Share Friedman Memories 

There are many commentaries on Milton Friedman's life and his contributions to economics scattered around the econ blogs. One very interesting memorial I've yet to see linked is a discussion among his Chicago colleagues. Robert Lucas, Sam Peltzman (attired in his usual way), Gary Becker, and Eugene Fama shared their memories of Friedman in a videotaped discussion a few days after his passing. From Milton's bad driving habits - by concentrating on the argument, he had a tendenecy to miss turns - to the nature of his Econ 301 course in price theory, the video provides more "up close and personal" views of the great man than you'd find from most sources in the commercial media.

The video lasts about an hour and is a long download, so "right-click-and-save" is advised. Here is the web page, which contains an obituary and links to media commentary as well, and here is the video. The discussion was organized by Anil Kashyap of the Chicago GSB, and is well worth listening to when you have an hour to relax and reflect. Thanks to Casey Mulligan for the link.

Friday, December 01, 2006

Ten Top Stadium-Naming Deals 

From Forbes, courtesy of Craig Newmark,
With a deal to name the Mets' new stadium in New York, Citigroup follows the lead of fellow banking giants Bank of America, JPMorgan Chase and Wachovia, who have all splashed their names on stadiums across the country. But Citi’s deal with the Mets leaves these others in the dust when it comes to its cost. The 20-year deal is the most lucrative in the history of pro sports, worth an average of $20 million a year. Here's a look at the ten biggest naming deals.
The link is a slide show that shows the ten biggest deals.

Update (by Skip): The slide show is cool, but for those that want to go to the story first, click here.