Hedge Fund Bets Broncos Will Be Champions Sunday

Jan 31 2014 | 12:15pm 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

Prominent Hedgie Renee Haugerud Embroiled in Ugly Child Custody Battle

Sep 10 2014 | 2:43pm ET

A high-profile hedge fund manager is caught up in a nasty child custody battle in...

Lifestyle

Full House’s Stamos To Play TV Hedge-Fund Manager

Sep 5 2014 | 4:43am ET

The life of a Connecticut hedge-fund billionaire is coming to the small screen.

Guest Contributor

The Cult of Loss Aversion: A Call to Rethink Risk in Global Macro Investing

Sep 4 2014 | 5:45am ET

In the wake of a traumatic loss, whether it is financial or personal, it is just...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

In search of the ‘new normal’ at the Fed

The Federal Reserve keeps baby-stepping toward a “normalization” of monetary policy. But just what is normal?

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.