Tuesday, 20 December 2016

Does January transfer spending improve results?

Last week the Sunderland chief executive, Martin Bain, warned that only "very limited" funds will be made available to David Moyes in the January transfer window (see here, here and here). Bain said that Sunderland are “not going to be able to spend to get out of trouble” and that "we have reached a point where there has to be a time where you don’t have that short-term hit to plug the holes in the dam".

The implication is that Sunderland have put their long-term financial health at risk in previous seasons by spending substantial sums in January in a last-ditch effort to retain their EPL status. While they have indeed survived their recent flirtations with relegation, is there any compelling evidence that winter spending actually improves results in the second half of the season? By out-spending their rivals, are troubled teams boosting their chances of staying up, or are they just using up previous financial resource that could be invested more carefully in their future? In this blog I’ll try to investigate these questions.

January spending and results improvement.

The goal is to establish whether there is any relationship between January transfer spending and an improvement in results in the latter half of the season. For each of the last six seasons, I calculated the gross January expenditure of every EPL team using data taken from transferleague.co.uk[1].  To measure the improvement in results for each team, I calculated the average number of points per game they collected in matches played either before or after January 1st in each season and took the difference (second half of the season minus the first).

Figure 1 below plots the change in points-per-game versus gross January expenditure for all EPL teams in each of the 2010/11 to the 2015/16 seasons (each point represents a team in one of those six seasons). On average, just under two thirds of EPL teams spent more than £1m in (disclosed) transfer fees in any given January window, with just over a third spending more than £5m and a fifth spending more than £10m. There are four clubs that spent more than £30m in January: Chelsea in 2010/11 and 2013/14, Liverpool in 2010/11 and Man United in 2013/14. The average change in points/game between the two halves of the season is close to zero[2] and there is no significant correlation with the level of spending.

Figure 1: Change in the average points-per-game measured before and after 1st January against total spending in the January transfer window for all EPL teams in each of the last six seasons. 

Not all teams will be looking for an immediate return on their investment in January. Some will be buying back-up to their first team or young players for the future. The teams that will certainly be looking for an immediate impact are those embroiled in the fight to remain in the EPL. In Figure 2 I’ve highlighted the relegation-threatened teams in each season. Specifically, this includes all teams that were in the bottom 6 positions in the table on January 1st, plus those that went on to be relegated at the end of the season (as you’d expect, most relegated teams were also in the bottom 6 in January)[3]. Teams that were relegated are coloured red; those that survived are blue. 

Figure 2: Change in the average points-per-game measured before and after 1st January against total spending in the January transfer window for all EPL teams (grey crosses) in each of the last six seasons. Teams marked by a square were in the bottom six of the table on 1st January; those in red were relegated, those in blue survived.
There are a couple of interesting things about this plot. First -- the majority of relegation-threatened teams see an improvement in their results in the second half of the season. I think this is just mean reversion: teams that underperform in the first half of the season are likely to do better in the second half. For example, over the last six seasons, teams in the bottom half of the table collected an average of 0.2 points/game more in the second half of the season than the first. The opposite is true of teams in the top half of the table: they tended to be an average of 0.2 points/game worse-off in the second half of the season. 

Second -- there is no significant correlation between spending and improvement in results for relegation-threatened teams. If we split them into two groups, those that spent greater than £5m in January and those that spent less, we find that 38% (6/16) of the high spenders and 55% (12/22) of the low spenders were relegated. This difference is probably not big enough to be significant. Raising the stakes higher – of the four relegation-threatened teams that spent more than £20m in January, three were relegated: Newcastle & Norwich last year, and QPR in 2012/13.

It seems reasonable to conclude that teams should resist the temptation to try to spend their way out of trouble: there is little evidence that it will pay off. It looks like Bain is being prudent in tightening the purse strings.


[1] Note that for some teams it will be an underestimate as the transfer fee was never disclosed.
[2] This doesn’t have to be the case. For instance, there could be more draws in the first or second half of the season.
[3] The results don't change significantly if we selected relegation-threatened teams as being those within a fixed number of points from the relegation zone.

Friday, 2 December 2016

Playing in Europe does affect domestic results in the EPL

There’s recently been a bit of discussion in the media (e.g: Sky, Guardian) on whether participation in European competitions has a negative impact on an EPL club’s domestic performance. This is partly motivated by the significant improvements shown by Liverpool and Chelsea this season: after 13 games they are 10 and 17 points better off than at the same stage last season, respectively. Neither are playing in Europe this year. Leicester are demonstrating a similar trait, albeit in the opposite direction: they are now 15 points worse off than last season. For them, the Champions League seems to have been a significant distraction.

Numerous studies have demonstrated that there is no ‘hangover’ effect (see here and here) from playing in Europe. There is no evidence that EPL teams consistently perform worse in league matches that immediately follow a midweek European fixture. But what about the longer-term impact? Perhaps the mental and physical exertion of playing against the best teams in Europe manifests itself gradually over a season, rather than in the immediate aftermath of European games. If this is the case, we should be able to relate variations in an EPL team’s points haul from season-to-season to the difference in the number of European fixtures it played.

It turns out that there is indeed evidence for a longer-term impact. The scatter plot below shows the difference in the number of European games played by EPL teams in successive seasons against the change in their final points total, over the last 10 seasons. Each point represents a single club over successive seasons. For instance, the right-most point shows Fulham FC from the 08/09 to 09/10 season: in 09/10 they played 15 games in the Europa cup (having not played in Europe in 08/09) and collected 7 fewer points in the EPL. Teams are only included in the plot if they played in European competitions in one or both of two successive seasons[1]. The green points indicate the results for this season relative to last (up to game week 13); the potential impact of European football (or lack of) on Chelsea, Liverpool, Southampton and Leicester is evident. Chelsea's league performance from 2014/15 to 2015/16 is a clear outlier: they played the same number of Champions League games but ended last season 37 points worse off.
Effect of participation in European competitions on a team's points total in the EPL over successive seasons. Green diamonds show the latest results for this season compared to the same stage last season. Blue dashed line shows results of a linear regression. 

The blue dashed line shows the results of a simple linear regression. Although the relationship is not particularly strong – the r-square statistic is 0.2 – it’s certainly statistically significant[2]. The slope coefficient of the regression implies that, for each extra game a team plays in the Europe, they can expect to lose half a point relative to the previous season. So, if a team plays 12 more games, it will be 6 points worse off (on average) than the previous season. 

It’s worth noting that the CIES Football Observatory performed a similar analysis in a comprehensive report on this topic published earlier this year.  They found there to be no relationship between domestic form and European participation over successive seasons. However, in their analysis they combined results from 15 different leagues across Europe. So perhaps the effect is more pronounced in the EPL than other leagues? This recent article in the Guardian, citing work by Omar Chaudhuri, suggests that the effects of playing in Europe may be more pronounced in highly competitive divisions. The lack of a winter break may also be a factor: while teams in Italy, Spain and Germany enjoy several weeks rest, EPL teams will play four league matches over the Christmas period. 

Finally, an obvious question is whether we are simply measuring the effects of playing more games across a season. To test this, we should apply the same analysis to progress in domestic cup competitions. However, I’ll leave that to the next blog.


[1]. The points along x=0 are teams that played the same number of European games in successive seasons (and did play in Europe both seasons). The only two teams that are omitted are Wigan and Birmingham City, both of whom played in the Europa League while in the Championship. Matches played in preliminary rounds are not counted.
[2] The null hypothesis of no correlation is resoundingly rejected.