by Sean Campbell
We have all heard the most terrifying acronym ever to spawn from Bartley Hall— “F.M.R.”—echo throughout the dining halls, classrooms and hallways of Villanova’s sprawling campus.
This abbreviation, short for Financial Management and Reporting, has been tormenting sophomore business students since it was first introduced in 2010.
“The subtle differences and intricacies of each problem, if not paid attention to in enough detail, can easily trip up students,” related sophomore business major Stephen Donnelly.
As difficult as the team-taught finance and accounting class is, the finance portion may not be as foreign as many perceive.
In fact, the general financial strategies closely match the tactics that millions employ when they participate in the far more leisurely activity of fantasy football.
“At its fundamental level, fantasy football is about minimizing risk and giving yourself the best odds to win,” explained ESPN fantasy expert Mathew Berry in his “Draft Day Manifesto 2013.”
Essentially, Berry understands that in the mercurial game of football, strange things are bound to happen. Anything from season ending ACL tears to the benching of valuable players can ruin a fantasy team.
By drafting players with contrasting skills, Berry believes that one or two unpredictable set-backs to crucial players will not shatter a manager’s dreams of fantasy glory.
Financial investors seek to minimize the unexpected misfortunes of stock prices in much the same way.
Since there is always potential for a company to experience sudden disasters, like striking workers or a CEO developing a serious medical condition, investors must minimize the risk of a single company’s misfortune ruining their entire wealth.
Stockholders avoid this potential disaster through a process known as diversification.
Unlike non-diversifiable risk, meaning risk associated with general economic conditions like unexpected changes in interest rates or inflation, diversifiable risk can be eliminated through a diverse stock portfolio.
By holding many different stocks, wealth is diffused so that one company’s unexpected misfortune is cancelled out by another company’s unexpected fortune.
The analogy between finance and fantasy football is perhaps clearer if fantasy football terms are linked with financial terms.
So, each individual football player can be seen as a stock, combining together with other players on a team to form a portfolio.
The same portfolio diversification strategy to minimize risk applies to a fantasy team so that the success of the team is not contingent on the success of one player.
The goal of every fantasy football draft, then, is to select players with a diverse skill set. This way a consistent but average scorer, like Jacksonville Jaguars’ receiver Cecil Shorts, can complement a player like Detroit Lions’ running back Reggie Bush, who frequently scores a lot of points but is often injured.
While it may seem tempting to form a team of high-risk high-reward players, it is extremely difficult for this type of team to generate consistent performances.
Because risk is such a crucial feature in fantasy football, it is essential to develop measurements to asses a player’s risk.
The statistical basis for fantasy football lends itself to the same player evaluation that financial ratios offer to assess a company and its outlook.
Where a company’s debt ratio reveals the company’s financial risk, football statistics like yards and touchdowns can produce similar ratios to reveal a player’s risk.
In fantasy football, yards are a much better indication of a player’s consistency than touchdowns are.
In standard leagues, a wide receiver earns one point for every 10 receiving yards he gains and six points for every touchdown he scores.
Though touchdowns are more valuable, they are far more difficult to predict. For instance, in 2011, Detroit Lions’ receiver Calvin Johnson led all NFL wide receivers with 16 receiving touchdowns and 1,681 receiving yards.
In 2012, he still led the league in receiving yards with 1,964 but his touchdown total dropped from 16 to five.
In order to gauge how statistics influence each player’s risk, it is plausible to develop ratios around a player’s touchdown to yard totals.
Essentially, a player who receives the majority of his points through touchdowns in a season is much less likely to replicate that performance the next season and is therefore a risky selection.
While these high touchdown scorers may be risky, they offer high rewards because touchdowns are so greatly valued. Aside from pure statistics, another major determinate of a player’s risk is his susceptibility to injury. While many fantasy experts highlight players who are injury prone, few offer a more systematic look into a player’s injury history.
It would be interesting if fantasy websites could develop a rating system, like Moody’s Investors Services for bond credit rating, to evaluate a player’s health.
For example, players similar to Philadelphia Eagles’ quarterback Michael Vick might receive the equivalent of a C credit rating because of their extensive injury history.
Eli Manning, on the other hand, might be one of the few players to receive an AAA rating since he has not missed a game since becoming the New York Giants’ starter in 2004.
While this connection between risk factors in fantasy football and finance may seem obscure, many prominent financial advisors have translated their financial expertise into fantasy success.
Mad Money host Jim Cramer, for instance, held a fantasy football stock pick special in which he related several fantasy players to their company equivalent.
He aligned Minnesota Vikings’ running back Adrian Peterson with Boeing because they both recovered extraordinarily well from threatening setbacks.
“Boeing comes back from injuries and comes back stronger to keep on taking yards,” he explained. “The stock is up 37 percent this year despite the Dreamliner battery issues, the fires, the sequester and a choppy stock market.”
This relationship between company to player, team to portfolio and stock market to fantasy league demonstrates how the grueling world of finance can be enjoyable when viewed through the lens of sports.
Perhaps now the finance section of FMR will seem more relevant when thought of in ordinary football language rather than confusing business lingo. For the accounting section, however, all I can say is, “good luck.”