The nature of the sportsbetting marketplace is relatively simple to understand. Bettors find an edge that they can profitably exploit; soon followed by bookmakers adjusting to reflect the popularity of the prevailing thought processes behind those winning wagers. Over time, the marketplace evolves. The factors that worked to produce profitable results for bettors get priced into the market and no longer offer that same level of value, leaving bettors scrambling to find new edges to exploit. And this marketplace evolution can happen rather quickly; over the course of a single season when conditions warrant.
Among the major US sports over the last five years, nowhere has the betting market adjustments and evolution been greater than in baseball. MLB handicapping methods that worked throughout the first decade of the 21st century are now largely obsolete. The MLB betting markets have always been strongly tilted towards starting pitching matchups. But over the last five years, the markets have rapidly adjusted to reflect the most influential ‘advanced metric’ stats for starting pitchers.
What are those stats? For starting pitching, the markets are fixated on two things: xFIP and K/9 rates. ERA doesn’t matter. A starter or a team’s overall record of wins and losses don’t matter. Lineups are a relatively small piece of the equation. Bullpens – both in terms of rest and general effectiveness -- are rarely seriously factored in to any MLB moneyline. It’s all about the starting pitching. And in particular, it’s all about the FanGraphs-type stats; stats from a very popular and influential baseball advanced metric website.
If you’re betting baseball and you’re not familiar with xFIP or K/9 rates, you’re out of sync with the current markets. xFIP (adjusted Fielding Independent Pitching) is the new ERA, an advanced metric stat that tries to take the luck factor out of the equation. It is based solely on what the pitcher can control – primarily walks, strikeouts and fly ball rates, with fly ball pitchers penalized in the formula for the home runs they are expected to allow. There are no league or park adjustments to the standard xFIP formula and a team’s defensive capability behind their pitching staff is a non-factor as well.
xFIP measures what gets hit and where it gets hit. That has proven to be a FAR better indicator of upcoming success than the older metrics – ERA and WHIP, for example. The markets LOVE betting on pitchers with strong xFIP numbers, and LOVE betting against pitchers with weak xFIP numbers, measured in a runs per nine innings format, just like ERA. When a pitcher has an ERA of 5.00 and an xFIP of 2.50, the markets will price him based on the latter number, not the former.
K/9 rates (strikeouts per nine innings) is the other ‘new’ stat that has taken the betting markets by storm over the last few years. The modern markets love pitchers that get strikeouts and dislike pitch-to-contact guys. A starter averaging a strikeout or more per inning – the Chris Sale’s and David Price’s of the world -- will be priced like an ace. The guys who don’t get whiffs – the RA Dickey’s and Mark Buehrle’s of the world – will be priced like bottom tier starters. Soft tossers are devalued; fastballers are not. Fly ball pitchers are devalued; ground ball pitchers are not. Pitchers with an ERA consistently lower than their xFIP (KC’s Chris Young as the #1 example of all-time) are devalued. Pitchers with an ERA consistently higher than their xFIP tend to be overvalued.
So where does that leave us with Opening Day fast approaching? Let’s look back at last year for some fascinating illustrative examples.
The defending World Series champs – the Kansas City Royals – had an average ‘lay’ price of -111 last year on their way to the title. KC didn’t have the type of starting pitching that measured well in the modern marketplace; devalued as a result. They were a Top 5 team in profitability during the regular season and the most profitable team to support in the postseason, in large part, due to the fact that you rarely had to lay a big price to support them. Starting pitchers like the aforementioned Chris Young or Edison Volquez were (and continue to be) thoroughly disrespected. Remember, this team was only favored THREE TIMES in the entirety of the postseason as they went on to win the World Series, undervalued in game after game.
Cleveland won 14 fewer games than KC during the regular season in 2015. They scored 55 fewer runs than the Royals while allowing only one run less than KC for the entirety of the campaign. Yet the average price with the Indians was -120, compared to that -111 for KC. Remember, the Royals went to the World Series in 2014 – they didn’t come out of nowhere. The Indians haven’t won a playoff game since 2007, reaching the postseason only once in the last eight years. And yet Cleveland was CONSISTENTLY being priced higher than KC in the betting markets – all year long!
How did this happen? Simple – the advanced metric pitching stats. Corey Kluber, Carlos Carrasco and Danny Salazar all ranked in the Top 5 AL pitchers in that key K/9 stat. All three hurlers ranked in the top 10 of the American League in xFIP as well. That resulted in Cleveland backers being forced to lay a higher price to support them. The Tribe finished 81-80, certainly not a disaster of a campaign, but they cost bettors more than -13 units, ranked among the bottom quartile of MLB teams in terms of profitability.
The Mets came out of nowhere to win 90 games during the regular season. But Mets backers earned only +6 units of profit for the entire season because the betting markets fell in love (and remain in love) with Matt Harvey, Noah Syndergaard and Jacob DeGrom. This year, with all three guys priced like aces from Day 1, if the Mets win 90 games again they’re likely to be moneylosers.
The Nationals have extraordinary starting pitching, and the advanced metrics love Washington’s staff. But anyone who bet Washington last year got crushed, losers of -19 units over the season. The Dodgers had Clayton Kershaw and Zack Grieke at the top of their rotation, true aces. LA, too, was a significant moneyloser in 2015, and will not be an easy team to make money with this year.
In Part 2 of this article next week, I’ll explain why the 2015 Minnesota Twins were such a great bet last year, and why teams like Minnesota are likely to be among the biggest moneywinners in 2016. When the markets overvalue one statistical area, they’re undervaluing others.