March Madness Final Four Odds: Michigan Leads at 57%

Segment Spotlight: Quick Hits From Prediction Market Edge

Analysis of Men's March Madness Final Four Qualifiers

Looking at the current qualifiers for Men's March Madness Final Four, Michigan leads with a 57% chance, followed by Arizona, Duke, and Houston. Interestingly, Michigan's probability has surged from 40% to 57% since February 8th, fueled by their recent rise to the top position in the AP poll. This jump in valuation comes due in part to their new ranking and the setbacks faced by other top teams.

However, there's a notable discrepancy in the market values between Michigan and Houston. Despite having nearly identical resumes and Houston being ranked number 2, Houston is priced fourth at 36%, suggesting a potential undervaluation. This 21% gap between the two top teams in the country could indicate an investment opportunity—suggesting perhaps it's wise to short Michigan and invest in Houston, especially considering the high variance involved in surviving a single-elimination tournament.

Moreover, the path to the Final Four remains unclear, which could impact high-seeded teams unexpectedly facing tough opponents early in the tournament. Joe and I also discussed the potential value in lower-ranked teams from underperforming conferences. For instance, Virginia from the ACC is currently trading at only 6%, where a $100 investment could yield significant returns if they perform well towards the end of the season.

The overarching investment strategy here is to buy low and sell high, especially important in a context with high variance like the NCAA tournament. Overpaying at this stage could be risky and may not constitute sound asset management.