Markets vs. The Wisdom of Crowds in picking NCAA Basketball winners

Michael Giberson

Once again this year, like millions of folks around the country, I filled out a NCAA basketball tournament bracket. Once again, my bracket is far from perfect. Once again, this year, I have been searching for an edge. (Preferably, the kind of edge that will enable me to out-pick my sports-minded, math-teacher wife.)

By the way, I take no comfort from Carl Bialikís column in the WSJ which suggests that the odds of picking a perfect bracket are 1 in 150 million, or 1 in 124 billion, or maybe 1 in 36 million billion, depending on how you set up your model. (Hat tip to Skip Sauer.)

Having followed the Ticket Reserve market for NCAA basketball tournament “fan forwards,” (see here and here) I wondered whether fan forward prices were a reliable indicator of likely winners in the tournament. A fan forward for the regional games pays off in the ability to purchase tickets to the game at face value if the selected team wins in the first two rounds. If the value of a ticket to a regional game is independent of the teams that reach the regional games, then the fan forward price reflects the probability of the teamís success.

After entering my own bracket into the ESPN.com Tournament Challenge, at 9 AM last Thursday I checked Ticket Reserve prices and filled out a “Market Signal” bracket, in each case selecting as winner the team with the higher priced fan forward. For comparison, I entered a third bracket based upon the favorites shown in ESPNís national bracket, which tabulates all submissions to the site. I called this third bracket “Wisdom of Crowds” (with apologies to James Surowiecki). I thought that picks based on Ticket Reserve prices in a real money market for ticket options would be superior to picks based on the aggregation of entries into the no-cost-to-enter ESPN Tournament Challenge. By the way, the brackets were very similar, only differing in 8 of 63 picks.

With two rounds played, Market is beating Wisdom of Crowds. Using ESPNís scoring the results are: Market-460, Wisdom-420. These scores put Market surpassing 95 percent of all entries submitted to ESPN, while Wisdom is down at 67 percent.

Market has won out so far by picking Kentucky over UAB, Wichita State over Seton Hall; and Arizona over Wisconsin in the first round, and picking West Virginia to win in the second round. On the other hand, Market had Arkansas while Wisdom picked first-round winner Bucknell. Notice that in each of these cases Market took the favorite and Wisdom picked the slight upset; Wisdom was right once.

For the regional games beginning tonight, Market has UCLA beating Gonzaga and losing to Memphis in Oakland, while Wisdom has Gonzaga prevailing over both teams and reaching the final four. The remaining picks are identical until the championship, where Market says Duke and Wisdom says UConn.

My own bracket scores a 410 — 57 percent — thank you for asking. Next year I think Iíll play the “Market.”

UPDATE: After the 3rd Round, Market hit the 97th percentile on the ESPN Tournament Challenge, while Wisdom sank lower. But Saturday’s game were no help to either bracket, with Market listing Duke and Memphis as winners while Wisdom had Duke and Gonzaga. (At 660 pts, 88th percentile; and 580 points, 61st percentile).

On the other hand, my own bracket had UCLA beating Memphis and has come to 690 pts in the ESPN scoring system, at the 94th percentile.


10 thoughts on “Markets vs. The Wisdom of Crowds in picking NCAA Basketball winners

  1. Playing the Brackets

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  2. Forget playing NCAA basketball brackets. That’s like playing a version of Powerball where you’re forced to spend five hours picking your numbers. Fantasy baseball/football is the same except it takes longer. If only we all lived in Vegas and could take advantage of their idiot line-setters. Prohibition in America is still alive and well – it’s just shifted.

  3. Don’t FanForwards also reflect demand for the tickets as well, not just win probability? Given two teams with equal chances to win, their fan forward prices wouldn’t be equal if one had more dedicated fans wanting tix. This would seem to dilute the predictive power. It’s true fans of a team expected to win could diversify by trying to pickup Forwards of likely opponents, but the primary effect seems like it would exert more force on prices. But, perhaps I’m not thinking this all the way through.

  4. I think you are right Larry, but I couldn’t think of a good way to estimate these other contributors to demand. Maybe average home game attendance?

    Hadn’t thought all of this through. Mostly, I thought I’d start simple and see how it works out.

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