Randomness and sample size

I have had a strange relationship with volleyball, as I’ve documented here. Unlike in most other sports I’ve played, I was a rather defensive volleyball player, excelling in backline defence, setting and blocking, rather than spiking.

The one aspect of my game which was out of line with the rest of my volleyball, but in line with my play in most other sports I’ve played competitively, was my serve. I had a big booming serve, which at school level was mostly unreturnable.

The downside of having an unreturnable serve, though, is that you are likely to miss your serve more often than the rest – it might mean hitting it too long, or into the net, or wide. And like in one of the examples I’ve quoted in my earlier post, it might mean not getting a chance to serve at all, as the warm up serve gets returned or goes into the net.

So I was discussing my volleyball non-career with a friend who is now heavily involved in the game, and he thought that I had possibly been extremely unlucky. My own take on this is that given how little I played, it’s quite likely that things would have gone spectacularly wrong.

Changing domains a little bit, there was a time when I was building strategies for algorithmic trading, in a class known as “statistical arbitrage”. The deal there is that you have a small “edge” on each trade, but if you do a large enough number of trades, you will make money. As it happened, the guy I was working for then got spooked out after the first couple of trades went bad and shut down the strategy at a heavy loss.

Changing domains a little less this time, this is also the reason why you shouldn’t check your portfolio too often if you’re investing for the long term – in the short run, when there have been “fewer plays”, the chances of having a negative return are higher even if you’re in a mostly safe strategy, as I had illustrated in this blog post in 2008 (using the Livejournal URL since the table didn’t port well to wordpress).

And changing domains once again, the sheer number of “samples” is possibly one reason that the whole idea of quantification of sport and “SABRmetrics” first took hold in baseball. The Major League Baseball season is typically 162 games long (and this is before the playoffs), which means that any small edge will translate into results in the course of the league. A smaller league would mean fewer games and thus more randomness, and a higher chance that a “better play” wouldn’t work out.

This also explains why when “Moneyball” took off with the Oakland A’s in the 1990s, they focussed mainly on league performance and not performance in the playoffs – in the latter, there are simply not enough “samples” for a marginal advantage in team strength to necessarily have the impact in terms of results.

And this is the problem with newly appointed managers of elite football clubs in Europe “targeting the Champions League” – a knockout tournament of that format means that the best team need not always win. Targeting a national league, played out over at least 34 games in the season is a much better bet.

Finally, there is also the issue of variance. A higher variance in performance means that observations of a few instances of bad performance is not sufficient to conclude that the player is a bad performer – a great performance need not be too far away. For a player with less randomness in performance – a more steady player, if you will – a few bad performances will tell you that they are unlikely to come good. High risk high return players, on the other hand, need to be given a longer rope.

I’d put this in a different way in a blog a few years back, about Mitchell Johnson.

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