Trade deadline post-mortem: what worked, what didn’t?
Now that the summer trade deadline has passed, we’re starting to reflect on how our model matched up to reality. We’re still catching up with all the trades, so the data is not yet complete. But in the meantime, we can share a few observations.
So far, it looks like the majority of the trades fit our model quite well, especially the ones in the small-to-medium range. Overall, the data suggests it’s following a normal distribution curve, where there’s a cluster in the middle, some outside of that range, and then a few outliers. This is normal.
Those that fit well:
- Shane Greene to the Braves was a nice fit, value-wise, especially after the chatter of the Tigers wanting a top prospect like Carter Kieboom, where the value gap was enormous – it was good to see the Tigers come back to reality on that one.
- Tanner Roark to the A’s was also a close fit, especially when we learned cash was included. Others, such as Roenis Elias, Sam Dyson, Jesus Aguilar, Nate Jones, etc. all fit our model.
Our benchmark is to match or exceed the correlation standard set by the major projection systems, such as PECOTA, ZiPS and Steamer. So far, we appear to be slightly above their benchmarks, according to analyses such as these.
The misses seemed to fall into two categories: high-need/marginal-win value situations or information gaps.
High-need/marginal-win value situations:
The Braves needed relief help badly, so much so that they agreed to take on all of Mark Melancon’s money (and negative value). Interestingly, they chose that route rather than pay in prospect capital. The marginal-win value case applies here too, in that the Braves value Melancon’s expected win contributions going forward in a playoff race and postseason run more than other teams would, or in other circumstances.
The big trade of the day, Zack Greinke to the Astros, was a case of both high-need/marginal-win value and information gap. The Astros want to win another World Series, and research such as that provided by fivethirtyeight suggests that teams in their positions should indeed pull out all the stops to improve their chances of doing so. The information gap aspect was in the money: there are conflicting reports about how much money the Astros are responsible for going forward. Our pre-trade valuation on Greinke was low, based on the amount of money that has been and will be deferred, per Spotrac. By our calculations, that would mean they’re responsible for about $83M (discounting for inflation). Yet we’re now hearing that the Astros are only on the hook for $53M, which changes the picture dramatically – there’s about a $30M difference there, which explains the prospect package they gave up.
Information gap situations:
The trade of Jesus Sanchez and Ryne Stanek to the Marlins for Trevor Richards and Nick Anderson illustrates this point. Sanchez is a consensus Top 60 prospect by all major evaluators; that translates into a higher value than what he was traded for, which suggests that the Rays knew more about him than the evaluators did. (We’re not prospect evaluators ourselves; we base our valuations on their ratings, so if they miss something, so do we.) Culling the roster for an anticipated roster crunch also played into it, as well as filling a need for an MLB-level starter in a playoff race.
We consider these trades outliers. Major-league baseball is a market that is small, closed, and inefficient – compare it to, say, the stock market, which is large, open and efficient. It’s small, because there are only 30 actors; it’s closed, because they keep a lot of information private; and it’s inefficient for those reasons and because it’s largely illiquid – it’s hard to move or acquire an asset sometimes.
So in markets with these characteristics, there is going to be high variance. That is an economic truth. We therefore accept the variances, in the hopes that for the most part, the rest of the data points fall close to the mean.
Because it’s an illiquid market, it means some teams don’t match up with others very well. The Yankees, uncharacteristically, couldn’t find any moves to make. We think that’s because they didn’t have the right prospect capital to work with – they are holding on to Deivi Garcia (rightly so); below him, there is a gap and a package of assets that may or may not be attractive to anyone else. Complicating matters for them, guys like Greinke and Mike Minor have NTCs that block them from being traded there.
It’s also significant that pieces that were expected to move, like Madison Bumgarner and Zack Wheeler, did not. We believe that’s because their true value was under 11.6 (in both cases, we have them in the 7s), and 11.6 is our estimate of the value of the compensatory draft pick the Giants or Mets would receive if they issued those guys qualifying offers at the end of the year. So that was the floor for trading, and no one wanted to meet it, because it was an overpay.
So even though those were not deals we can capture, we think there’s something there that validates our model as well.
We also know that the summer deadline period is much more volatile than the offseason, because the divide between buyers and sellers is more pronounced, and the marginal-win concept takes hold. In the offseason, there is more stability and equilibrium. That’s why we back-tested the model in the offseason, because the findings are more reliable in a stable environment than in a noisy, volatile one.
That also means that when you test the model in a volatile state, there will be higher variance.
Having said all that, we’re going to review all the inputs of the model now that we have more data to work with, and fine-tune a few things to make it more accurate than it is. We’re very open to feedback, and want to be as transparent as we can, so if you have any suggestions on how we can continue to improve BTV, please let us know: contact us at [email protected]
Founder and editor