Are NBA Draft Markets Efficient?

Evidence from
Pace-Adjusted Measures*
Joseph Engelberg
Grant Goodstein

Abstract: Professional sports teams are often faced with the daunting task of evaluating amateur
talent for the purposes of a draft. How can they best use available data, say of a player in college, to
forecast how that player will perform in the pros? Using data on all NBA draft picks of college athletes
between 2003 and 2012, we find that NBA teams could improve their draft picks by incorporating
pace-adjusted metrics in their selection decisions. Specifically, in linear regressions we find
differential predictability for an NBA players performance. When we use measures of his collegiate
productivity without pace-adjustment, points produced per game, we find no predictability for win
shares or player efficiency rating (PER) after controlling for the players draft number. However,
when we use pace-adjusted measures of collegiate performance, such as points produced per
possession, we find significant predictability for win shares and player efficiency after controlling for a
players pick number. A one standard deviation change in collegiate points produced per possession
(CPPP) predicts a change in win shares commensurate with 14 draft spots. That is, by increasing the
CPPP of its selection by one standard deviation an NBA team would be able to draft a player with the
26th pick that had the average performance of a 12th pick. Taken together, the results suggest NBA
draft markets are inefficient because they do not correctly incorporate all available information when
assigning picks.

* We have benefited from discussions with Christopher Parsons, Ken Pomeroy, Paul Tetlock and Jared Williams.
We thank Ken Pomeroy for his assistance with the data.

Contact: Joseph Engelberg, Associate Professor of Finance, University of California San Diego, (Email)
jengelberg@ucsd.edu, (Tel) 858-822-7912; Grant Goodstein, University of Michigan, (Email)
gmgood@umich.edu, (Tel) 760-585-6882.

I.

Introduction

A critical function of most professional sports organizations is the selection of players in a

draft. This task is notoriously difficult: each team must use their information to select the best players
from a large pool of candidates. Teams cannot, of course, make selections that maximize the realized
performance of players because realized performance is subject to random chance (such as a postdraft injury). The question of draft market efficiency, the topic of this paper, is whether teams use all
available information at the time of the draft to select players that maximize expected performance.
Draft market efficiency has several implications. First , if draft markets are efficient and teams
have access to the same information then the draft should provide a particular rank-order of players:
the first pick should, on average, be better than the second, the second better than the third, the third
better than the fourth and so on. Moreover, draft market efficiency implies that there exists no
available information at the time of the draft which could, on average, improve selection. For
example, suppose, all-else equal, a 70 center in basketball performs better in the National Basketball
Association (NBA) than a 610 center. Because player height is available at the time of the draft we
would expect, on average, a 70 center to be drafted before a 610 center. If this were not the case, we
would say draft markets are inefficient because they did not correctly incorporate all available
information at the time of the draft.
In this paper we examine whether draft markets are efficient in the NBA by asking whether
certain measures of productivity in college are correctly incorporated into the NBA draft order. The
NBA offers a nice laboratory for examining whether draft markets are efficient for a few reasons.
First, because the salaries of draftees are essentially fixed for the first few years -- ever since the 1995
collective bargaining agreement -- teams wishing to maximize productivity per dollar spent have an
incentive to pick players based on expected productivity. Moreover, professional basketball has welldeveloped measures of individual performance, such as win-shares (Kubatko (2013)) and player
efficiency rating (Hollinger (2003)).
Our key finding is that NBA draft markets appear efficient when considering per-game
measures of collegiate productivity, such as points produced per game, but inefficient when
considering per-possession measures of college productivity, such as points produced per possession.
In short, NBA teams fail to fully appreciate differences in pace and possessions across
college basketball teams and players when making their draft selections.
To illustrate the point, consider the case of Kevin Love from UCLA and Michael Beasley from
Kansas State in the 2008 NBA draft. Both were highly-touted freshmen power forwards of similar size
(Love is 6-10 and Beasley is 6-9). Based on per-game measures, Beasley held a clear advantage over
Love. He averaged 26.2 points per game (compared to Loves 17.5) and 12.4 rebounds per game
(compared to Loves 10.6). However, these per-game statistics reflected a much faster pace at Kansas
State compared to UCLA during the 2007/2008 season. Kansas State ranked #30 in the nation based
on possessions per 40 minutes while UCLA ranked #250. Moreover, Beasley spent more time on the
court than Love (78.3% vs. 73.9%) and participated in more possessions when on the court (33.5% vs.
27.7%). All of these contributed to higher per-game averages for Beasley. However, when considering
per-possession measures of collegiate productivity, Love held the advantage. For every 100
possessions, Love produced 126.6 points compared to Beasleys 119.8. While Beasley was the second
2

overall pick in the 2008 draft and Love was the fifth, Loves NBA career has been more successful than
Beasleys by most measures. For example, Loves career win-shares per 48 minutes are .172 compared
to Beasleys .044, and Loves career player efficiency rating is 22.1 compared to Beasleys 15.
The anecdote generalizes to our sample of 440 collegiate players drafted into the NBA between
2003 and 2012 when we compare the differential predictability of collegiate points produced per
game (CPPG) and collegiate points produced per possession (CPPP). We find that CPPG is a better
predictor of draft number than CPPP (as in the previous example), but it does not predict various
measures of NBA performance after controlling for draft number. CPPP, on the other hand, reliably
predicts various measures of NBA performance after controlling for draft number. A one standard
deviation increase in CPPP is commensurate with an improvement of 14 draft spots. That is, by
increasing the CPPP of its selection by one standard deviation an NBA team, for example, would be
able to draft a player with the 26th pick that had the average performance of a 12th pick.
Our paper belongs to a small, but growing, literature which has examined the efficiency of
professional drafts (e.g., Massey and Thaler (2010), Coates and Oguntimein (2010), Berri, Brook and
Fenn (2011), Spurr (2000) and Burger and Walters (2009)). To the best of our knowledge, this paper
is the first to document a fixation on per game measures of collegiate productivity and find evidence
that draft picks could be improved by incorporating per possession measures of collegiate
productivity.
II.

Data

Our data come from two primary sources.

We collect from Basketball Reference
(www.basketball-reference.com) a history of all NBA draft picks dating back to 1950. We also
download from Basketball Reference a set of NBA performance measures win shares per 48 minutes
(WS48) , win shares and player efficiency rating (PER) -- for each player selected in each draft. Win
shares was developed by Kubatko (2013) for basketball following the well-known measure developed
by Bill James for baseball (James and Henzler (2002)) and estimates an individual players share of
his teams wins. PER was developed by Hollinger (2003) and is a rating based on a players perminute productivity.
We collect data on collegiate activity from Ken Pomeroys website (www.kenpom.com)
including team tempo (possessions per 40 minutes), individual offensive rating, individual percent
minutes played and individual percent possessions. From these data we calculate for each player in
his last year prior to the draft: (1) the total number of points he produced, (2) the total number of
possessions he used and (3) the total number of games he played. (1) and (2) are calculated following
Oliver (2004). From these we define collegiate points produced per game (CPPG) as the ratio of (1) to
(3) and collegiate points produced per possession (CPPP) as the ratio of (1) to (2).
The intersection of the two datasets is 440 college players drafted into the NBA between 2003
and 2012. Those 440 players have a mean CPPG of 14.81 with a standard deviation of 3.87, and a
mean CPPP of 1.12 with a standard deviation of 0.077. Of those 440 players, 397 played at least one
NBA game so that we can measure performance. Those 397 players have a mean WS48 of 0.0665
with a standard deviation of 0.0674 and a mean PER of 12.39 with a standard deviation of 4.61.
3

III.

Analysis

We begin with the following question: can collegiate measures of productivity predict NBA
performance after accounting for a players draft number? Or, said another way, is there valuable
information in measures of college productivity that is not fully captured by a players draft number?
Figure 1 illustrates our main result. We first sort each collegiate player into one of four draft
groups: players selected with one of the first 15 picks are in the top group and players selected with
one of the last 15 picks are in the bottom group. Then, within each draft group we further sort into
two groups based on measures of collegiate productivity. In Panel A the measure of productivity is
points produced per game and in Panel B the measure of productivity is points produced per
possession.
From Panel A, a few trends emerge. First, it is clear that draft number is strongly associated
with NBA performance: those drafted in the top group have an average WS48 (0.086) which is more
than double those drafted in the bottom group (0.035). The steady rise of the bars in the graph
indicate the relationship is monotonic across draft groups . Moreover, within each draft group,
collegiate points produced per game have little predictability for win shares. For example, those in the
top draft group with above-median CPPG have an average WS48 of 0.084 compared with 0.089 for
those with below-median CPPG (t-stat -0.59). Likewise, those in the bottom draft group with abovemedian CPPG have an average WP48 of 0.036 compared with 0.034 for those with below-median
CPPG (t-stat 0.23).
From Panel B, however, we find strong predictability for WS48 within draft group when we
sort on collegiate productivity per possession: in every draft group the above-median CPPP group
outperforms the below-median CPPP group. For example, considering the top 15 draft picks, above
median CPPP players had an average WS48 of 0.095 compared to 0.0761 for below-average CPPP
players (t-stat 2.15); for draft picks 16 30 above median CPPP players had an average had an average
WS48 of 0.085 compared to 0.056 for below-average CPPP players (t-stat 3.51); and for draft picks 31
45 above median CPPP players had an average had an average WS48 of 0.071 compared to 0.047 for
below-average CPPP players (t-stat 2.51). Only in the bottom group is the difference between abovemedian and below-median CPPP players insignificant (0.036 vs. 0.034 with a t-stat of 0.18).
In Table 1, we formalize the sorting exercise in a regression framework. In the first two
columns, we ask how CPPG and CPPP predict a players draft number. Formally we estimate the
following two linear regression models:

(1)

(2)

where Draft Number is a players pick number in the NBA draft (1 through 60), CPPG is
collegiate points produced per game, CPPP is collegiate points produced per possession and Controls
consist of draft year fixed effects and position fixed effects. CPPG and CPPP are standardized so we
can interpret the units in terms of standard deviations. The coefficient estimates in columns 1 and 2
suggest teams pay more attention to points produced per game when making their draft selections. A
4

one standard deviation increase in CPPG corresponds to a player being selected 4.2 picks earlier.
However, a one standard deviation increase in CPPP corresponds to a player being selected 2.4 picks
earlier. Because the dependent variable is a count, we also run count regressions (poisson and
negative binomial) in an appendix table and find no substantive change in the results: NBA teams
appear to be more sensitive to points produced per game rather than per possession when selecting
players in the NBA draft.
The remaining columns of Table 1 suggest that this is a mistake. The columns present the
coefficients from several specifications of the following form:

(3)

(4)

where Performance Measure is win shares per 48 minutes (WS48) in columns 3 and 4, win
shares in columns 5 and 6 and player efficiency rating (PER) in columns 7 and 8.1 Controls include
draft year fixed effects, position fixed effects and draft number fixed effects (i.e., 59 separate dummy
variables for each pick number). This last control is worth emphasizing because if NBA draft markets
were efficient we should not be able to find any variable which predicts NBA performance after
controlling for draft number. And yet thats precisely what we find: CPPP reliably predicts each of our
measures of NBA performance after controlling for draft number. For example, column 4 suggests
that a one standard deviation increase in CPPP corresponds to an increase in WS48 of .0131 (t-stat
3.52). To appreciate the magnitude of this result, in an appendix table we consider the same
specification with a linear control for draft number (rather than draft number fixed effects). That
table indicates that moving up the draft one pick improves WS48 by 0.0009 so that a one standard
deviation increase in CPPP is akin to an improvement of .0131 / .0009 14 draft spots. In other
words, by increasing the CPPP of its selection by one standard deviation an NBA team would be able
to draft a player with the 26th pick that had the average performance of a 12th pick. Columns 3, 5 and
7 indicate the predictability for NBA performance is only found with our pace-adjusted metric, CPPP.
When we examine collegiate points produced per game, we find no predictability after controlling for
draft number. Thus, whatever value-relevant information exists in CPPG is subsumed by the draft
number controls.
IV.

Conclusion

Most reports of player productivity come in the form of per game averages (e.g., points per
game or rebounds per game). Such reports can mask crucial differences in pace and possessions
across players and teams. We find evidence that NBA teams fail to fully appreciate these differences
when making their draft choices. The draft picks of NBA teams could be substantially improved by
incorporating per-possession -- rather than per-game -- measures of collegiate performance into their
selection decisions.

1 The number of observations falls to 397 in columns 3 8 because 43 of our 440 NBA draft picks did not play in an

NBA game. In an appendix table we show our results do not change if instead we assign a value of zero (rather than
missing) for these 43 observations.

Figure 1: NBA Performance and Measures of Collegiate Productivity

Panels A and B plot average win shares per 48 minutes. Averages are calculated by draft group and collegiate
points produced per game (per possession) in Panel A (Panel B). Possessions, points produced and games are
taken from Ken Pomeroys website (www.kenpom.com) and are calculated in a college players final year prior to
draft.

PANEL A

NBAWinShares(per48minutes)
0.1
0.09

Points
Producedper
Gamein
College(Low)

0.08
0.07
0.06
0.05

Points
Producedper
Gamein
College
(High)

0.04
0.03
0.02
0.01
0
Picks4660

Picks3145

Picks1630

Picks115

PANEL B

NBAWinShares(per48minutes)
0.1
0.09
0.08

Points
Producedper
Possesionin
College(Low)

0.07
0.06
0.05
0.04

Points
Producedper
Possesionin
College(High)

0.03
0.02
0.01
0
Picks4660

Picks3145

Picks1630

Picks115

Table 1: Draft Number, NBA Performance and Measures of Collegiate Productivity

Each observation corresponds to a college basketball player drafted by an NBA team between 2003 and 2012. The dependent variable in columns 1 and
2 is the players draft number (1 through 60). The dependent variables in columns 3 8 are various measures of NBA performance: win shares per 48
minutes (columns 3 and 4), win shares (columns 5 and 6) and player efficiency rating (columns 7 and 8). Draft number, win shares per 48 minutes, win
shares and player efficiency rating are taken from Basketball Reference (www.basketball-reference.com). The main independent variables are collegiate
points produced per game in the odd columns and collegiate points produced per possession in the even columns. Possessions, points produced and
games are taken from Ken Pomeroys website (www.kenpom.com) and are calculated in a college players final year prior to draft. Position and draft year
fixed effects are included in each specification. Draft number fixed effects are included in columns 3 8. Standard errors robust to heteroskedasticity
(White (1980) are given in parentheses. *, ** and *** indicate significance at the 10%, 5% and 1% levels respectively.

DependentVariable:

CollegiatePoints
ProducedPerGame

NBADraft
Number

NBADraft
Number

4.197***

NBAWin
Sharesper
48minutes

NBAWin
Sharesper
48minutes

0.0008

NBAWin
Shares

0.9191

NBAPlayer
Efficiency
Rating

NBAPlayer
Efficiency
Rating

0.3620

(0.8790)

(0.0041)

(0.7650)

(0.2519)

CollegiatePoints

2.4084***

0.0131***

2.0538***

0.7055***

ProducedPerPossession

(0.8502)

(0.0037)

(0.5753)

(0.2230)

PositionFixedEffects

YES

YES

YES

YES

YES

YES

YES

YES

DraftYearFixedEffects
DraftNumberFixedEffects

YES

YES

YES

YES

YES

YES

YES

YES

NO

NO

YES

YES

YES

YES

YES

YES

Observations

440

440

397

397

397

397

397

397

0.0422

0.0095

0.1077

0.1431

0.3435

0.3571

0.2486

0.2655

AdjustedR

NBAWin
Shares

Appendix Table A.1: Robustness

Each observation corresponds to a college basketball player drafted by an NBA team between 2003 and 2012. The dependent variable in columns 1 - 4
is the players draft number (1 through 60). Columns 1 and 2 (3 and 4) report the results from a poisson (negative binomial) regression with the same
independent variables as columns 1 and 2 of Table 1. Columns 5 and 6 repeat the specifications in columns 3 and 4 of Table 1 with the exception that
missing values for the dependent variable (win shares per 48 minutes) are set equal to zero. The final two columns repeat the same specifications in
columns 3 and 4 of Table 1 except that they include the draft number itself as a control rather than draft number fixed effects. Standard errors are given
in parentheses. *, ** and *** indicate significance at the 10%, 5% and 1% levels respectively.

DependentVariable:

CollegiatePoints
ProducedPerGame
CollegiatePoints
ProducedPerPossession
DraftNumber

PositionFixedEffects
DraftYearFixedEffects
DraftNumberFixed
Effects
Observations
AdjustedR2

NBADraft
Number

NBAWin
Sharesper
48minutes

NBAWin
Sharesper
48minutes

NBAWin
Sharesper
48minutes

NBAWin
Sharesper
48minutes

YES
YES

0.0010
(0.0038)

0.0010***
(0.0002)

YES
YES

YES
YES

0.0009
(0.0028)

YES
YES

NO

NO

YES

YES

NO

NO

440

440

440
0.1725

440
0.2180

397
0.1198

397
0.1519

NBADraft
Number

NBADraft
Number

NBADraft
Number

YES
YES

0.1596***
(0.0394)

YES
YES

NO

NO

440

440

0.1427***
(0.0316)

YES
YES

0.0841***
(0.0308)

0.0821**
(0.0345)

0.0114***
(0.0026)

0.0125***
(0.0033)
0.0009***
(0.0002)

YES
YES

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