Category Archives: Finances

Predicting sports game outcomes

NBA model performance for the last month

Being a sports fan and someone who uses machine learning, it is just a matter of time before you will attempt to use the skills to predict the outcomes of the sports games. The temptation is too great: alure of making money on the side while bettering your skills combined with working on something that’s interesting outside of writing software is a recipe for action. The number of articles like this is huge. My goal is to share the lessons I learned and offer tips for others that might want to do a similar project in the future.

It was a fall of 2018 and I was a complete newbie when it came to sports wagering. I knew nothing about sports betting, lines, spreads, etc. It was gibberish that I heard on sports podcasts that I found amusing but never really dug in or cared too much about.

The question of “could I build a model that gave accurate predictions” kept on coming back ever since I picked up machine learning two years ago. I’ve built numerous models for work and for play since and I tossed the idea around but never executed on it. It kept on nagging at me until one weekend in the fall of 2018 I decided to jump in.

It took me about two weeks to gather the basic stats and build training database and start building models. I then spent the next two weeks simulating bets against real lines posted online looking for the winning strategies. Basically, a month (I worked on this during the weekends only for the most part) before I settled on a model I liked and evaluated against the real wagering numbers week to week.

Outcome

Let’s me summarize what was accomplished before I dive into details as to how things were done and what was learned:

  • I built an NFL prediction model that predicted 68% of the games correctly for the 2017 season, and 65% for the 2018 season. Not that impressive, some of the models out there that I had seen were achieving 70-73% rate, but good enough to make money if you used it to wager on a certain class of games.
  • I learned a ton about financial modeling and dissected two financial modeling books, treating NFL games like futures one could purchase and sell. I ended up with a system in place that allowed me to experiment with strategies, evaluate the results, graph the outcomes and see what works and does not work.
  • I learned a ton about gambling and how the system is basically very skewed against the gambler, and how gamblers don’t care and go for it anyway. Hey, sometimes you just want to have fun.
  • The final setup that was built was robust enough to be reused in predicting NBA games with similar overall accuracy but not as useful as the NFL model if one tried to use it for wagering.

Again, 65% might not sound that impressive, but the devil is in the details. I had some models that resulted in %69-70 accuracy but were not that useful from a money-making perspective. That’s the beauty of a real-world exercise vs a classroom problem. If you are working on a hypothetical model that will never be used in real world, you will do all kinds of crazy optimizations to achieve the best overall accuracy. But when you go out and try to use it against real-world data that’s available to you, the best accuracy model might not be the one that makes you the most money. More on that later.

Key Lessons learned

  1. As is usually the case, the machine learning part was a small part of the project. The amount of time spent on model type selection, feature selection, and training is small compared to the time you have to spend on gathering the data, setting up systems to fetch the results automatically, pre-processing it to fit your model needs, and the amount of time you spend on looking for winning strategies.
  2. You can’t predict randomness and searching for perfect accuracy is a futile attempt that probably ruins many that attempt this exercise. I could have spent time in trying to optimize the model and gather more data to perhaps bring up the model accuracy to the %70+ range but settled on something that was good enough to give me %28 profit if the money was spent on real wagering lines.
  3. Evaluate, evaluate, and evaluate your strategies. After using the model for the 2018 season and looking back at the results, I have a feeling I got lucky and should spend more time on the evaluation of my model and more plotting of its pasts results that would give me more confidence of its performance. I went with a bit of blind faith and gut feeling that the model was good enough but retroactively was able to prove out that indeed it was good enough.
  4. Reading financial machine learning books gave good ideas in the system setup and evaluation. “Building Winning Algorithmic Trading Systems” was fantastic in that regard, and the same can be said about “Advances in Financial Machine Learning“.

Future Posts

I want to dive in deeper into how things were done and some key ideas that were used in building a system to predict the games. In the next coming weeks, I will publish more details about the process that was used to build the model. Then will dive into the model evaluation, the most critical step, if you ask me and then share more lessons and tidbits of knowledge gathered. Depending on how much data I have gathered by then, will also share the results of the system and how it is doing for NBA game predictions.

Book Review: The Richest Man in Babylon

Rating: 4 stars.

Amazon Link

I wish I had read this book sooner.  I found it very useful, despite its unusual, parable-like, story style. The stories teach the reader how to achieve financial success. Even though the setting is ancient times, the advice conveyed is very practical and applies today as well.

When we think about “financial success,” we often think of immediate and big gains: stocks that multiple overnight, big payday, bonus, etc. The reality is quite different: financial success comes to those that work hard and smart, plan for it, and then take patient and steady approach.

The book, which was written in the 1920s by an American author, shares stories that are mostly about a wise man Arkad and how he achieved financial wellness.

Arkad’s main rules are simple:

  • Save 10% of your income

  • Spend less than you earn, after you put away that 10%

  • Once you have a nice amount of money saved up, don’t keep it idle but instead make it work for you. i.e., invest it somewhere so it earns money.

  • Invest it wisely, don’t invest in the areas you don’t understand without an expert guiding your way. Make sure you can get the principal back safely.

  • Own the place you live in, i.e., don’t pay rent

  • Insure your life, your earnings where applicable

  • Increase your capacity to earn by acquiring skills and knowledge.

Now you could argue with some of the points here, but the principles in general are very sound. Save part your income, don’t spend lavishly, then start investing and get back principal AND interest, while keeping insurance around and all the time seeking for ways to improve your ability to earn. Can’t go wrong with that.

Some of the other things that caught my eye were around how you go about saving money. When you start to save, don’t go crazy and frugal to the max, just make sure you start with 10% savings, and that’s a good enough start.

However do analyze your spending and see if there are expenses there that can be cut (but again, within reason). Sometimes we forget subscriptions/services that we keep, and perhaps those can be avoided.

And one of my favorite: “Opportunity is a haughty goddess who wastes no time with those who are unprepared.” When the opportunity comes, those that take it benefit, and to take it you have to be ready – you just never know when it will come.