Hedge Fund Bets Broncos Will Be Champions Sunday

Jan 31 2014 | 1:15pm ET

A well-worn sporting trope warns that contests aren't decided on sheets of statistics—they are decided on the field. Analytic Investors may not disagree with that cliché, but it is willing to bet—literally—that it knows in advance who will win Sunday's Super Bowl.

The Los Angeles hedge fund has produced a hedge-fund-like model to analyze each of the 32 teams in the National Football League. And its NFL Alphas analysis has picked the winner of the Super Bowl in nine of the last 10 contests.

The Alphas model analyzes teams as though they were stocks, attempting to determine their "returns on investment" over the course of the year, in this case the investment being the point spread established by Las Vegas bookmakers. That gives each team an "alpha" score, and this year, the Seattle Seahawks boast a much-higher alpha score than the Denver Broncos.

Before you call your bookie and put it all on the Seahawks, who are actually the betting-line underdogs in the big game, wait: The analysis isn't over. Basically, the Seahawks higher alpha indicates that they have routinely outperformed bookmakers' expectations this year, and by more than the Broncos.

Historically speaking, according to Analytic, that's bad news for them on Sunday, because teams the underperformed during the year tends to outperform during the post-season.

"If you're looking at these two teams as stocks, you could see the Seahawks as the team that's in the news and has kind of relatively outperformed and it's a hot stock that's been bid up throughout the year," analyst Matt Robinson told Business Insider. "And we expect that stock to come back to earth, per se, in the post season."

"The Broncos will win because they had the worst ROI, return on investment, out of the two teams. So we see that the team with the lower ROI, or alpha, tends to be a little undervalued going into the post-season."

Vegas currently has the Broncos winning at Met Life Stadium by two points. Analytic says they'll win by at least three.


In Depth

Q&A: Decathlon Capital On Revenue-Based Alternative Lending

Oct 30 2017 | 3:49pm ET

The explosion in private credit activity since the end of the financial crisis is...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Saxby: Not All EBITDA Is Created Equal

Nov 30 2017 | 8:02pm ET

Record levels of dry powder are driving competition among private equity firms to...