The Inherent Nature of Variance in Sports Investing

Sep 24, 2012

I always remind clients that negative variance is an inherent nature of sports investing, particularly over the course of an entire season.  For example, fumbles are 90% random in football, which makes it very difficult (if not impossible) for professional handicappers to predict such random events. Interceptions can be more accurately predicted based upon a quarterback’s propensity to throw bad passes, but the inherent nature of variance will always play a significant role in a sports investor’s profit/loss statement at the end of a season and/or year.  What is important to remember is the fact that ‘bad beats’ (i.e. negative variance) are generally off-set by the same number of ‘lucky wins’ (i.e. positive variance) over a large enough sample size of wagers.


Unfortunately, I had a 5* selection on Florida State on Saturday (9/23/12), a game in which the Seminoles completely dominated from the line of scrimmage.  Florida State out-gained Clemson by 241 yards (667 yards vs. 426 yards), while maintaining a +7 advantage in first downs and a +5:48 edge in time of possession.  Those statistics are not as alarming as the ones that follow, all of which demonstrate how negative variance turned my Florida State investment from a 27-point winner to a 12-point loser:

  • Florida State out-rushed Clemson 287 yards at 7.2 yards per carry to 136 yards at 3.6 yards per carry.
  • Florida State out-passed Clemson 380 yards at 10.9 yards per pass play to 290 yards at 7.4 yards per pass play.
  • Florida State out-gained Clemson 667 yards at 9.1 yards per play to 426 yards at 5.1 yards per play.
  • Florida State place kicker Dustin Hopkins, who is one of the best kickers in the nation, missed two relatively short field goals at critical junctures in the game.  Making just one of those field goal attempts would have resulted in an against-the-spread win.  Clemson’s place kicker also made a 50-yard field goal, which is a low-percentage probability.
  • Florida State was -2 in fumbles margin (90% random), including botching a punt return that resulted in giving Clemson outstanding field position.  Florida State possesses one of the best special teams units in college football so missing two field goals and fumbling a punt return was certainly unexpected.
  • Clemson ultimately got the spread-covering touchdown in the final minutes of the game by converting a 4th-and-goal situation.  The deflected pass ended up in the wrong receiver’s hands, but it still counted for six points and reminded every Florida State investor how cruel negative variance can be.

Based on years of research and analysis, a game as lopsided as the one set forth above would result in a Florida State victory by approximately 27 points.   Unfortunately, negative variance stole my winning ticket from my hands late on Saturday night.  And, no, I am still not over it.