A Starting Point for Navigating the World of Daily Fantasy Basketball

Abstract

Fantasy sports, particularly the daily variety in which new lineups are selected each day, is a rapidly growing industry. The two largest companies in the daily fantasy business, DraftKings and Fanduel, are valued at more than 1billion.Thisresearchfocusesonthedevelopmentofacompletesystemfordailyfantasybasketball,includingboththepredictionofplayerperformanceandtheconstructionofateam.First,aBayesianrandomeffectsmodelisusedtopredictanaggregatemeasureofdailyNBAplayerperformance.Thepredictionsarethenusedtoconstructteamsundertheconstraintsofthegame,typicallyrelatedtoafictionalsalarycapandplayerpositions.ApermutationbasedandKnearestneighborsapproacharecomparedintermsoftheidentificationofsuccessfulteamsthosewhowouldbecompetitivemoreoftenthannot.Wedemonstratetheefficacyofoursystembycomparingourpredictionstothosefromawellknownanalyticswebsite,andbysimulatingdailycompetitionsoverthecourseofthe20152016season.Ourresultsshowanexpectedprofitofapproximately9,000 on an initial $500 investment using the K-nearest neighbors approach, a 36% increase relative to using the permutation based approach alone.

Publication
In The American Statistician