Moneyball and Investing

“Bill James revolutionized the way we think about the game of baseball by assessing which factors are the most significant in determining the impact a player has on the outcome of a game.” –Larry Swedroe


That’s right, Larry. James’ research found that a players on-base percentage and slugging average are more important statistics than his batting average and number of homers hit. Today, every major league team employs a team of statistical experts to figure this all out. From the book and movie, Moneyball, we’re all familiar with how general manager, Billy Beane, used statistical experts to turn the Oakland A’s into a winning team with limited payroll.

This is all interesting stuff…but how does it apply to me, you’re probably wondering. Just as James’ research identified which factors were the most significant in determining the outcome of a baseball game, so has the research of Eugene Fama and Kenneth French had on determining which factors are most likely to lead to investment success.

Check out Swedroe’s article, What Investors Can Learn From Moneyball, for more insight into these factors.

As you are aware, it is precisely these factors identified by Fama/French’s research that we rely on to create our portfolio’s here at Verity Capital.