Trends in Free Agent Spending on Pitchers

In my previous articles in this series, I have looked at trends in free-agent spending over time, and specifically I have reviewed more recent data to see if market inefficiencies that I discovered in earlier work have disappeared over time. In this piece, I will review the findings on pitchers in my 2013 Hardball Times Annual article. In that piece, I discovered that teams tended to overvalue old-school statistics that did not translate to actual value. This included wins for starting pitchers and saves for relief pitchers. I also noticed that free-agent pitchers with strong peripheral statistics (e.g. those with good FIPs, usually) were often undercompensated, suggesting teams did not all realize the importance of peripheral statistics in projecting future performance. Much of this seems to have been corrected by the market over the years, although a handful of players have created some noise.

My earlier work found that pitchers with more wins tended to be overpaid relative to other starting pitchers. I have attempted to reproduce this finding in my new framework, and the effect appears much smaller. From 2006-11, starting pitchers with at least 15 wins were paid 8% more than those with less. While this is still directionally similar to my earlier findings, it is a smaller effect. It also appears to have completely disappeared from 2012-16. This is not actually surprising, since there are probably no more teams that can get tricked by high win totals belied by high ERAs.

Of course, pitchers with low ERAs could simply be lucky and/or the beneficiaries of good defense. From 2006-11, many teams probably were already skeptical of pitchers with high ERAs and high win totals. But teams may not have sufficiently scrutinized pitchers with high FIPS and low ERAs. Reproducing this analysis, I do find a sizable discount for pitchers whose FIP fell short of their ERA for 2006-11. This also appears to have shrunk notably (but not entirely) for 2012-16. I suspect at this point most teams are already pretty much aware of DIPS theory, but some teams may be missing this.

Previous analysis found that saves were generally overpaid and holds were generally underpaid (at least relative to saves). More thorough analysis of 2006-11 data for this piece still finds this to be true, but interestingly it appears to be even truer for the 2012-16 period. Teams spent $26.5 million per WAR for pitchers with at least 20 saves the year before signing their contracts. While this would appear to suggest that teams are overvaluing closers, instead it seems more likely that a handful of deals worked out particularly badly (e.g. Heath Bell, Joe Nathan, Jonathan Papelbon) and this is skewing the analysis. The price of pitchers with high numbers of holds actually went down in the 2012-16 period, but this is probably just a function of the small sample size and the specific pitchers who happened to have high holds totals.

Like the other articles in this series, these findings paint the general picture that teams are getting smarter in their free agent targeting. This article on pitchers is somewhat complicated by the fact that the OPP Premium for pitchers (as explained in an earlier article in this series) has gone down so much, leading to a different mix of pitchers being over- or underpaid. But there does seem to be some move towards better valuation of starting pitchers.

In my last article of this series, I would put all of these findings together and discuss the implications for teams targeting free agents.