Expected Return Vs. Volatility

During a lengthy debate on the wisdom of my Mike Stanton pick in the fourth round of the 14-team Yahoo! Friends and Family League, a couple of the commenters panned the pick due to the possibility (they estimated 20 percent) Stanton would struggle would due to his low contact rate and get sent down to the minors. Whether or not that's true (I think 20 is too high, and if so, that would mean he was playing badly enough to get sent down which means getting sent down would hardly make things worse), the argument boils down to: "Stanton is a bad pick in the fourth round of a 14-team mixed league because his non-injury-related floor is too low." Setting aside the merits of the argument about Stanton in particular (which are laid out in detail in the debate linked above), I think the argument misses a key point generally.

When we project players, we necessarily have to assume they'll perform at the 50th percentile given all of their possible 2011 seasons. After all, a player is equally likely to exceed or fall short of his mean level of production. For that reason, players with significant downsides are likely to suffer in most projected-stats-based rankings. But is trying to draft the best team assuming every player in the league had his average season the optimal strategy for winning an actual league where the variance is all over the map? In other words, should rankings be based strictly on expected returns, or can a player with a lower mean season but a higher 90th percentile one give you a better chance to win your league?

I would argue that the shallower the league, i.e., the higher the level of replacement value, the more important it is to focus on a player's ceiling than his floor. In other words, given two players with equal 50th percentile projections, the one with greater volatility should be worth more in shallower formats. That's because you can always replace him with someone adequate if he fails, and if he succeeds, he greatly boosts your chances of winning the league. At some point, of course, the difference in mean expected value is large enough that the lower ceiling/higher floor player is worth more - even in a shallow league. And the expected return of players in the fourth round tends to be high. But the more volatile the player, the less likely that his full potential for profit is priced in even if you draft him far higher than his 50th percentile projections would warrant.

A player's volatility then is an important consideration not captured by his mean projection and one that increases his value in inverse proportion to the depth of your league. The bottom line: don't needle me about what could go wrong - I'm focused on what could go right.


By: Mark Stopa
On: 3/28/2011 5:30:00 PM
"I would argue that the shallower the league, i.e., the higher the level of replacement value, the more important it is to focus on a player's ceiling than his floor."

I totally agree with this sentence. Sometimes an extreme, ridiculous example illustrates the point. This past NFL season, for instance, I was in a six-team league. All season, I filled my team with high-upside guys (like Vick when he was hurt). Yes, it's a different sport, but I'm certain it works the same way in baseball. The shallower the league, the more important upside becomes, especially for bench spots.

However, I think the issue with Stanton - or anyone, for that matter - isn't just replacement value on waivers. It's comparing who you could get instead of that player at that draft position. After all, unless Stanton gets sent down, you're never going to actually cut/bench him. So the issue is what player(s) you're giving up to have him in your starting lineup on a weekly basis.
On: 3/29/2011 4:37:00 AM
This is an excellent point. I rarely draft low-contact hitters largely because of perceived volatility but I agree with the notion that shallow leagues necessitate attempts to gain higher potential from top-tier players.
One question, however.

Aren't batters who can safely provide a good average (via a high contact rate) plus other skills (namely power) a bigger premium, regardless of league size? Seems like there will be a number of prospect call-ups during the year, for instance, who have the raw skills like power or speed but lack the plate discipline that comes through experience. In a shallow league, might it be easier to make up a particular shortcoming like power or average or runs or whatever, but tough to find well-rounded players who can provide value over multiple categories?

I guess I wonder not so much about the volatility of a player like Stanton himself, but rather the structuring of the entire portfolio of assets, and whether risk and upside has been appropriately balanced given a categorical perspective of replacement value.

-Eriq at
By: matthewthill7
On: 3/29/2011 8:09:00 AM
Contact rate is sorta like fingerprints for hitters, and is typically not an attribute that varies meaningfully with experience gained (i.e., a guy will vary between 75% one year and 77% in another, but typically won't see something as drastic as 75% and 83%). Stanton's contact rate last year was 70.2%. While not great, that rate certainly isn't low enough to have people as apprehensive as they are. Dunn (71.1%), Josh Hamilton (74.5%) and Ryan Howard (67.0%) are three examples of guys who have carved our perfectly fine careers, despite not having ideal contact rates. People are reacting like Stanton is Mark Reynolds - he's not. Reynolds' career contact rate - 62% - is an order of magnitude below Stanton's; that comp doesn't hold water. Additionally, I'd say that Stanton's batted ball profile - 1.06 GB/FB - is right in the sweet spot of being able to have a solid average and hit enough fly-balls for homers. That is how I think he's different from a Dunn (.71 GB/FB), who won't hit enough grounders to keep the average up.

Stanton's power last year was at 22.9% HR/FB, which is already elite, and ranked SECOND in all of baseball last year, only behind Joey Votto (25% HR/FB). That's right, better than Ryan Howard (21.1% HR/FB), Jose Bautista (21.7% HR/FB), Adam Dunn (21.3% HR/FB) and Miguel Cabrera (19.8% HR/FB). His power is completely legitimate.

Lastly, the fantasy community overreacts to hitters' strikeouts. Yes, Stanton does strike out a lot (relatively), but so what?
By: Chris Liss
On: 3/29/2011 10:06:00 AM
Mark - whether you compare Stanton to the player on waivers or the opportunity cost of the pick, his volatility is still an important variable when determining his value.
By: Chris Liss
On: 3/29/2011 10:08:00 AM
FBJ - yes, well rounded players have more value than one dimensional ones generally, but someone who can steal 80 bases or hit 50 homers will still be worth taking a chance on in a shallow league more than a deeper one where downside is a bigger consideration.
By: Chris Liss
On: 3/29/2011 10:10:00 AM
Agreed Matthew - the Reynolds comparison is silly. No one is Mark Reynolds, and the notion that Stanton's Ks are anything special, especially in 400 rookie at-bats as a 20-year old is overblown. Every player can have a bad year, but for Stanton to be sent down his year would have to be so bad that you'd be better off with him out of your lineup anyway.
By: nayfel
On: 3/29/2011 2:53:00 PM
FBJ and Matthew both make excellent points.

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On: 4/4/2011 8:31:00 PM
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