The stock market, as with basketball, is all about maximizing your return on investment. Or at least, I think it is; I am the furthest thing from a finance expert. But the theory holds up either way; everybody wants to end up with more than what they put out initially. On Wall Street, it’s dollars, and in the NBA, it’s wins.
So how does one go about optimizing their ROI? The answer is complicated, but in essence boils down to using the right information to make the right bets. Defining “right” in either case is a subject worthy of academic study by itself, but we do our best and hope for the same. In the case of the NBA, the statistical revolution that we’re all still experiencing has put a wide array of tools at our disposal.
One of those tools (RPM) was used by ESPN’s Kevin Pelton to put together a full projection of each teams’ win totals for next season. Whether you trust the methodology or not, it’s pretty neat to see the Bucks all the way up at 46.9 wins, which is good enough for the 4th seed in the Eastern Conference.
RPM projected W-L records for next season.— NBA on ESPN (@ESPNNBA) August 3, 2017
How's your team looking? pic.twitter.com/gWUJxKjeV4
With all this in mind, I had an idea. Wouldn’t it be fun to pit Brew Hoop staffers against each other in an oversimplified version of the stock market, where we would buy and sell “shares” in teams based on their winning percentage, and use it to predict how we think teams will end up? And with a resounding “maybe,” the Brew Hoop W-Index (BHWI) was born. Here’s how the whole thing works:
- Wins are what we want to base everything on, so the initial price for a share of any team will be their win total from 2016-17. For example, a single share of the Golden State Warriors would be $67, one share for the Milwaukee Bucks is $42, and so on. Here’s the full breakdown of the price index for this cycle:
- For simplicities’ sake, writers may only buy shares in batches of five (5, 10, 15, etc.)
- Also for simplicity, there’s no rules on who can or can’t invest where, or any set order for writers to make their picks.
- Each participating writer gets a budget of $1,000 with which to invest. They can buy as many (or as few) shares of teams as they wish, provided the sum is below the limit.
- Once everyone makes their selections, the writers will be ranked on our BHWI Leaderboard based on their Portfolio Value, which is the sum of the value of their investments minus the amount remaining unspent in their budget. For example, if I spend $980, my Portfolio Value will be 960 ($980 worth of investments - $20 surplus budget.) This is in place to promote spending over
Once the season gets going, we will revisit the Leaderboard to see how everyone is doing, and we’ll “open the markets” periodically for buying/selling, using team’s winning percentage (extrapolated out to 82 games) as the new price for each subsequent cycle.
As a fun bonus that also illustrates what the next cycle could look like, here’s what the BHWI would look like using Kevin Pelton’s RPM predictions:
As you can tell, lots of green (good value) with the teams that didn’t fare so well last year, and tons of red (bad value) for the top-level teams. The goal of this is to add a bit of competition to our NBA predictions. Can anybody make a mint off of NBA fortune-telling? Will anyone actually spend on a 50+ win team? And how many of us actually believe enough in the Milwaukee Bucks’ record improvement to put their money where their mouth is?