Super Bowl-Winning Quants Say Patriots Will Cover Point Spread

Super Bowl
A general view of fans as they watch players from the New England Patriots answers qustions from the media during Media Day ahead of Super Bowl XLVI against the New York Giants at Lucas Oil Stadium on Jan. 31, 2012 in Indianapolis. Photographer: Michael Heiman/Getty Images

The New England Patriots will win the Super Bowl by at least three points even though the New York Giants have the appeal of “a cocktail party stock,” according to a quantitative money management firm that’s correctly picked the team covering the point spread for eight consecutive years.

Analytic Investors LLC in Los Angeles has documented a tendency on the part of Super Bowl bettors to overestimate the chances of the team that rewarded them more during the regular season -- the team with the higher alpha, in investment parlance. In 2008, that was the favored Patriots, who lost to the Giants 17-14. This year, it’s New York.

“Everyone thinks the Giants are rolling right now, a lot of people in my office even,” said Matthew Robinson, a portfolio analyst for global and Japanese equities at Analytic and the author of this year’s analysis. “They like the Giants, but they have faith in the model as well.”

This season, bets on New York, led by quarterback Eli Manning, to win each of their regular-season games returned more than bets on the Patriots to do the same. As a result, the three points by which the Patriots, led by quarterback Tom Brady, are favored to win in Indianapolis on Feb. 5 is probably too small, Robinson said.

“The Giants have the higher alpha this year,” Robinson said. “Teams that have outperformed expectations during the regular season tend to underperform in the playoffs.”

Beating Expectations

In each of the past eight Super Bowls, the team that outperformed expectations by the greater degree during the regular season, if favored, failed to cover the point spread or was upset. In three games, including last year’s 31-25 Super Bowl victory by Green Bay against Pittsburgh, the team with the lower regular-season alpha was favored and covered the spread.

“I liked the Patriots before I even got the numbers out, but most people like the Giants,” Robinson said. “They’ve been the hotter team. They are like the cocktail party stock that everyone’s talking about, that some people have made a lot of money on.”

Jeff Sherman, assistant sportsbook manager at the Las Vegas Hotel and Casino, said the Analytic formula looked at the game differently than the oddsmakers do.

“We took into account how the public has been betting the Giants the past few weeks and winning with them,” he said in a telephone interview. “We opened three based on that and have gotten a lot of Giants money anyway. I can see how it correlates from that perspective; not from a predicting standpoint maybe, but from a value standpoint.”

The methodology looks at the 32 NFL teams as though they were investments, calculating the return on bets that a team will win each of its regular-season games. While winning is a factor, winning as an underdog produces more alpha than winning as a favorite.

Top Alpha

This season, the San Francisco 49ers were the highest alpha team for the first time in 30 years, returning 52.5 percent, according to Analytic. They went 13-3 including four upsets. The Indianapolis Colts were the lowest alpha team, costing bettors 57.6 percent as they won two games and were favored in one.

The Giants’ regular-season alpha was 32.3 percent, as opposed to 16.1 percent for the Patriots. While the Giants went 9-7, winning five of the nine games in which they were favored, four of their victories were upsets. Among them were a 29-16 defeat of the Philadelphia Eagles on Sept. 25 and a 24-20 road victory over the Patriots on Nov. 6, both of which paid about 3-1 since the Giants had been underdogs of almost 9 points, Robinson said.

“Those two alone would’ve accounted for about six Patriots wins based on payouts,” he said. The Patriots, with Brady and coach Bill Belichick both going for their fourth Super Bowl title, went 13-3, winning two fewer games than expected, which hurt their alpha.

Devised by Sapra

Analytic’s methodology for computing NFL alphas was devised in 2004 by Steve Sapra, then a portfolio manager at the firm, and hasn’t changed, Robinson said.

“The big picture is this idea of market participants overreacting to information,” said Sapra, who now works in Los Angeles for Tobam, a quantitative investment manager based in Paris.

A shrinking point spread for this year’s Super Bowl, an indication of an increasing amount being wagered on the Giants and coach Tom Coughlin going for their second NFL title in four years, is consistent with that, Sapra said.

“Bettors are extrapolating the Giants’ recent string of upsets into the Super Bowl,” he said. “This makes no more sense than betting that a coin which has come up heads five times in a row is more likely to come up heads tomorrow.”

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