Sports Valuation and Analytics

Goals

team pre-dates form field

Issues Involved or Addressed

With the changing landscape of collegiate sports, the need for detailed valuation of sports teams is critical. Such analysis requires collection of unique data and understanding how to apply traditional valuation models (typically applied to a firm) to a sports team. While some of the data has already been collected by Dr. Garner, valuation requires the perpetual updating of new data; students will learn what data is relevant, collect this data, and build models to “value” and “price” sports teams. “Value” and “Price,” are different, despite many in the finance (and sports world) using these terms interchangeably. We will also examine the impact of transfer portal activity and NIL value on team performance, ticket sales, and recruiting expenses. Finally, sports betting and daily fantasy sports impacts sports valuation. Daily fantasy sports lineups are analogous to an investor’s stock portfolio. However, those lineups are terminated each week, with the option of creating an entirely new lineup in a new tournament. As Markowitz (2021) finds, “sports betting markets offer a novel laboratory to evaluate theories of cross-sectional asset pricing anomalies.” The absence of systematic risk and terminal values being exogenous to betting “evade the joint hypothesis problem, allowing mispricing to be detected.” Therefore, daily fantasy sports create a natural experiment to test behavioral finance theory, and as such, we can assess the impact of past performance on future risk taking.

Partners/Sponsors

Financial Services and Innovation LabPartnership for an Advanced Computing Environment (PACE)