Finding value in the lower leagues

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The lower leagues may not have the spending power or plethora of world-class talent that the Premier League has to offer, however, one thing they are rich in is highly competitive football.

This, in turn, makes it trickier for traders to price up matches, meaning there is a lot more value to be had, if bettors can find a successful way of analysing the data they have at their disposal.

Evaluating the lower leagues

One good way to gain a grip on the lower leagues is to look at the resources available to all clubs from the Championship to League Two.

Transfermarket is always packed with useful data with which to evaluate the cost of teams within many of the main European leagues. The current combined estimated market value of Chelsea and Manchester City exceeds that of the combined total for all of the 72 football league clubs by over £80 million.

The average current worth of a Premier League squad player is just in excess of £5 million, falling to three quarters of a million for a typical Championship player and reducing further to £130,000 and £80,000 respectively in League One and Two.  

Money is intimately linked to success in the Premier League and would appear to be strongly driven by the financial advantage enjoyed by the big spending teams from Tottenham upwards.

The current combined estimated market value of Chelsea and Manchester City exceeds that of the combined total for all of the 72 football league clubs by over £80 million

It is further down the Premier League, where outlay between teams is still significant, but more closely matched, where sides may enjoy an unexpectedly improved season or endure a poorer than hoped for campaign, either by utilising their outlay well or poorly or by the randomness of chance.

So, in attempting to select a lower league team who may outperform expectations, or one to oppose, it is worth looking not just at the overall cost of a squad, but also how close their spending is compared to their rivals.

Despite an often turbulent recent past, some former Premier League sides that are now playing in the lower reaches of the football league do retain some trappings of their former glory days.

Portsmouth, for example, are ranked as the best resourced team from the lowest tier, while Wigan, Sheffield United and Coventry, are amongst the most costly of squads in League One. Clubs who have recently dropped into the Championship can often retain near valued squads, thanks largely to the Premier League parachute payments introduced in 2013.

Using standard deviation to your advantage

A standard deviation is typically used to measure the amount of dispersion in a set of data and we may adapt its use to see how many natural rivals a side has in an upcoming season.

The average cost of a Manchester United squad player is estimated to be around £9.5 million and four teams have squad averages that are relatively close to this figure, when measured in terms of the standard deviation for the league as a whole.

The average squad values of Manchester City and Arsenal are slightly higher than that of Manchester United and Liverpool and Spurs have averages that are lower, but of comparable size.

Therefore, given the relationship between money and points, second place may be considered a realistic aim for United, whilst the latter two teams might expect to have Manchester United as a realistic target to overhaul.

Further down the Premier League, Stoke City has thirteen sides within one standard deviation of their estimated average squad value, encompassing seventh place to 20^th spot in the financial pecking order.

This possibly indicates the very real, ever present threat of relegation to many sides that are often seen as safe, mid table teams and the unlikely prospect of their breaking into the Champions League spots under their current budgets.

The majority of Championship teams have an average squad value in relation to their rivals that is more akin to the competitive environment faced by Stoke, rather than the fewer immediate rivals facing Manchester United.

19 of the 24 Championship teams have ten or more similarly spending rivals within close proximity of themselves, peaking with Charlton who are surrounded by 18 such rivals.

The same is true of League One. Twenty sides have ten or more close rivals, peaking at Shrewsbury, who have seven closely matched teams ranked above them and 13 lesser-rated rivals below.

Promotion should be keenly contested in the lowest tier, where even Portsmouth have six rivals who are valued at similar levels to themselves.

Using previous season’s finish as an indicator

Further evidence for the competitive nature of the football leagues can be found if we look at where the champions of the respective leagues finished in the previous season, over the last 20 completed seasons.

How football league champions fared during previous season - 1995-2015 

Multiple teams in the table above were promoted from a lower league or relegated from a higher level, which may partly explain their higher levels of success in the following season. For example, six relegated Premier League teams returned immediately as Championship title winners, but there were three such contenders in each season.

As a group, clubs who finish the season in 11th place or better in the football league, generally gain more points than expected, based around the odds quoted by bookmakers

The ability of a side to win their football league division only begins to diminish when we consider sides who finished 15^th or below in their previous campaign. Even then, a handful of lower placed sides still managed to subsequently lift the title.

So, partly, with the benefit of a greater turnover of teams through relegation and promotion, but also because of the competitive nature of the divisions, the football league has a much wider potential list of prospective champions than the Premier League.

As a group, clubs who finish the season in 11^th place or better in the football league, generally gain more points than expected, based around the true odds quoted by bookmakers for their chances of winning or drawing each of their individual 46 matches.

Match odds suggested that the previous ten winners of the Championship title would average 78 points, rather than the 92 they actually achieved.

This percentage over performance gradually decreases as we move down the table, so any match by match profit that might be won by predicting a side to finish just inside the top half of the table, but short of the top spots, is increasingly likely to be wiped out by the bookmakers over-round.

However, identifying teams which are going to fill the higher automatic promotion places has seen over performances which might generate a profit, even with the inclusion in the prices of an over-round.

And based on the diverse range of previous finishing positions for the champions over the past 20 seasons, these teams can come from unlikely sources.

In divisions where money is in shorter supply and sides have similar amounts to spend, some purchases can prove unexpectedly rewarding, especially for teams who might be exploring new methods of scouting or talent evaluation.

Use of the loan market, as well as tactical and managerial input may also reap more dramatic rewards than in the Premier League, where big money purchases may dominate match outcomes.

For those who wish to specialise and use the increasing amount of information that is available about England’s lower leagues, there is an opportunity to catch these teams early using the pointers here and take advantage of Pinnacle's low margin matchday markets for the English lower leagues.