Saturday, March 26, 2011

March Madness: Elite 8 Probabilities

The Financial Markets Program at the University of Chicago - together with Carlton Chin, a fund manager - devised a March Madness pool -- that models each game as a financial marketplace.  The pool is being run "round-by-round" so it can generate fresh pricing as each round develops. 

The points awarded for correct selections -- are based on market participant entries.  As a result, the final price for each game can be used as a proxy for the probability of a team advancing to the next round.  Below is a table that shows the final pricing for the current round's match-ups.  It is interesting that our financial marketplace model produced probabilities similar to projections from various sources.  The pool is designed to study:  
  • Financial marketplaces and market pricing.
  • Ideas of game theory.
  • Concepts of contrarian methods.

For more information - please visit the March Madness link at  Please also visit this summary of the March Madness Pool.

Financial Markets Program: Elite 8 Final Prices 
(Proxy for Probability of Advancing to Next Round)

Kansas 72%
VCU      28%

Arizona 55%
U-Conn  45%

North Carolina 52%
Kentucky 48%

Florida 57%
Butler 43%