Picking good NCAA Basketball Tournament brackets is a lot like value investing: look for good opportunities that are undervalued in the market. I’ve experimented with this approach for years now and finally decided to write some code to automate the process. I linked up with a friend Chris Mihm who’s been using a similar approach and we started geeking out on hoops math.

The Strategy

Value investing compares how good an opportunity is (e.g. company fundamentals) with its market value (e.g. stock price). Our strategy uses Vegas odds of overall victory as the measure of how good a team is, and the popularity of the team in Yahoo’s pool as the market value. We look for big disparity between these two values as a guide in making bracket picks likely to outperform in a pool.

Pool Size

The size of the market makes a huge difference in how this plays out. If you’re playing a 10-person office pool, don’t bother with this strategy. Make your picks based on Vegas odds alone. This strategy becomes valuable as pool sizes grow. I use it for a 400-entry pool and it definitely makes sense for large pools like Yahoo, ESPN, CBS, etc.

Interactive Bracket Optimizer

We built a bracket optimizer tool called BracketWise. It’s not quite ready for primetime this year, but might be of interest for hard-core bracketology geeks.

What teams should I pick in 2013

The table below shows the disparity between Vegas and Yahoo for the teams that have meaningful numbers in both categories. Make picks by looking at the Vegas odds and the Vegas/Yahoo ratio. For medium-size pools (e.g. 400 people), you may want to emphasize very good teams who also have good ratios, e.g. Florida has 10/1 odds to win it all in Vegas but is 40/1 in Yahoo, so you get a 4x “value advantage” from Florida. As pool size gets larger, you need more good risk to compete, so you might consider New Mexico, who has 20/1 odds to win it all in Vegas but is 200/1 on Yahoo for a 10x “value advantage”.

• Vegas = Vegas odds for overall tournament winner - source
• Yahoo = Yahoo bracket pool pick distribution - source

Team (seed)	Vegas	Yahoo	Vegas - Yahoo	Vegas / Yahoo
Pittsburgh (8)	0.0166	0.001	0.0156	16.666
Missouri (9)	0.0133	0.001	0.0123	13.333
Marquette (3)	0.0333	0.003	0.0303	11.111
New Mexico (3)	0.05	0.005	0.045	10.0
Saint Louis (4)	0.04	0.004	0.036	10.0
Arizona (6)	0.02	0.002	0.018	10.0
Oklahoma State (5)	0.01	0.001	0.009	10.0
North Carolina State (8)	0.02	0.002	0.018	10.0
Minnesota (11)	0.01	0.001	0.009	10.0
UNLV (5)	0.01	0.001	0.009	10.0
Notre Dame (7)	0.01	0.001	0.009	10.0
Oregon (12)	0.01	0.001	0.009	10.0
VCU (5)	0.02	0.002	0.018	10.0
Wisconsin (5)	0.05	0.006	0.044	8.3333
Kansas State (4)	0.02	0.003	0.017	6.6666
UCLA (6)	0.01	0.002	0.008	5.0
Butler (6)	0.01	0.002	0.008	5.0
Memphis (6)	0.01	0.002	0.008	5.0
Villanova (9)	0.005	0.001	0.004	5.0
Florida (3)	0.1	0.025	0.075	4.0
North Carolina (8)	0.0166	0.005	0.0116	3.3333
Syracuse (4)	0.0333	0.011	0.0223	3.0303
Michigan (4)	0.0555	0.02	0.0355	2.7777
Michigan State (3)	0.0666	0.025	0.0416	2.6666
Illinois (7)	0.005	0.002	0.003	2.5
Ole Miss (12)	0.002	0.001	0.001	2.0
Georgetown (2)	0.0555	0.029	0.0265	1.9157
Duke (2)	0.125	0.073	0.052	1.7123
Gonzaga (1)	0.1	0.066	0.034	1.5151
Kansas (1)	0.125	0.093	0.032	1.3440
Miami (FL) (2)	0.125	0.094	0.031	1.3297
Ohio State (2)	0.0666	0.056	0.0106	1.1904
Indiana (1)	0.1428	0.171	-0.028	0.8354
Louisville (1)	0.2222	0.284	-0.061	0.7824

Feedback Please

We’d appreciate feedback on the strategy and your thoughts on how you might use it to make picks!