Handicapping the FedEx Cup

The PGA Tour's FedEx Cup has been criticized for its overly complicated points system. But new research by professor Rendleman suggests organizers have it right.

The PGA Tour's FedEx Cup has been criticized for its overly complicated points system. But new research by visiting professor of finance Richard Rendleman suggests organizers have it right.

At the 2010 Tour Championship at East Lake, Atlanta, the finals of the FedEx Cup Playoffs, Jim Furyk sank a three-foot putt for the win. When his wife ran onto the 18th green to congratulate him, he asked her whether he had won the $10-million first prize in the FedEx Cup, a NASCAR-style points race that runs for the entire PGA season. "I have no idea," she said. He had won, they were soon informed, but during the day's final round, he had no idea where he stood in the complicated overall points system.

Furyk's predicament illustrates a key shortcoming with the current tournament format, which is often criticized for its lack of transparency and has prompted researchers, including Tuck visiting professor of finance Richard J. Rendleman and finance professor Robert A. Connolly of the Kenan-Flagler Business School at the University of North Carolina, to take a closer look at the competition.

Rendleman became interested in golf-related research 10 years ago, when he used a golf analogy to explain a particular stock-selection strategy to a group of local security analysts. Since then, he and Connolly have published two papers related to skill and luck in golf and have several more in the works. The game has become an active area of interest for scholars from several disciplines for a variety of reasons, among them the treasure trove of statistical data available to researchers (such as the PGA Tour's ShotLink database) and the possibility that advancements in statistical methodologies could be applied to other fields such as finance or operations.

For their latest research, "Tournament Qualification, Seeding, and Selection Efficiency: An Analysis of the PGA Tour's FedEx Cup," the authors assess the competition's "selection efficiency"—how well it performs in placing players in proper finishing positions according to their skill level. This matters to FedEx Cup organizers for two reasons: They want to distribute the $35 million in prize money—including $10 million for first place, $3 million for second, and $2 million for third—as fairly as possible, and they want to ensure that the very best players are left standing at the end.

Getting there isn't easy. PGA Tour members accumulate FedEx Cup points during the 35-week regular season. From there, the top 125 players are eligible to participate in the FedEx Cup Playoffs, a series of four, 72-hole stroke-play events beginning in late August. During the playoffs, players continue to accumulate points, but they do so at a rate five times greater than during the regular season. Through the first three playoff events, the field is reduced to 30 players. These players compete in the Tour Championship, with the player who accumulates the most points after the final 72-hole tournament winning the FedEx Cup.

In their paper, Rendleman and Connolly compare the current system to four other possible formats, all of which are more transparent. One of the proposed formats, for example, calls for eight rounds of 18-hole match play, with the top 28 players seeded according to their standing after the third playoff event. The first round features players seeded 21 to 28. As the rounds continue, lower-seeded players are eliminated and higher-seeded players enter the competition. The winner of the final round takes home the FedEx Cup. In this format, as in the other alternatives, points accumulated during the regular season and first three playoff rounds are used to select and seed players in the final tournament but are then disregarded.

To test the efficiency of each format, Rendleman and Connolly employed a statistical model they had published in the Journal of the American Statistical Association to estimate individual player skill functions (which can change over time) and random variation in scoring (how many strokes over or under predicted score) in a sample of 354 PGA Tour players who competed in a minimum of 90 tournament rounds between 2003 and 2009.  With their estimates of player skill and random variation in scoring, they were able to simulate 28,000 PGA Tour seasons, including the FedEx Cup Playoffs.  "As we're doing that, the players who we're simulating are accumulating FedEx Cup points. The points accumulated would identify the players who would go into the simulated playoffs, and  each would continue to accumulate simulated points until they get to the simulated finals, and then we see who the simulated winner is." After simulating 28,000 seasons of play, including playoffs and finals, Rendleman and Connolly then compare how the highest-skilled players fared in each alternative format.

What they found might be disappointing to FedEx Cup naysayers: The current system does the best job of identifying the best player and ordering finishers according to their estimated skill. "We find that it's quite efficient, not only in getting the ultimate winner right at the end," he said, "but in getting the right players into the finals competition in the first place."