Breaking Momentum

Back in 2010, I wrote about trading the NBA that:

The thing about runs is that they come to an end. Typically a coach will call a timeout when his team is on the wrong end of such a run, the idea being to break the momentum, and re-group, so if you're on the wrong end of a run, it's important to keep a clear head.

Interesting to see that a scientific study has shown this perception may well be correct. University of Technology Sydney Economics Professor Lionel Page tweeted:

The study was titled Separating psychological momentum from strategic momentum: Evidence from men’s professional tennis with the abstract containing the following:

In tennis, converting a break point potentially triggers both strategic momentum—due to a change in the relative position of the players—and psychological momentum—due to a change in the perception of the players. To distinguish between these two momentum types, we employ exogenously given interruptions. Interruptions are predicted to affect psychological momentum negatively, while leaving strategic momentum unaffected. Using 4,930 game-by-game observations from 141 Grand Slam men’s single matches, we show that the breaking players’ probability of winning a game increases after converting a break point, which provides evidence for momentum. Moreover, we show that this momentum effect is negatively affected by an interruption. Thus, psychological momentum seems to be the main trigger leading to a performance increase after a converted break point.

The study isn't free, and I am too cheap to pay $35.95 for it, but tennis traders might find it useful. I've never been a trader of tennis due to the prevalence of courtsiders, but if this is a sport you trade, it may well be that the idea outlined here is something you have noticed. 

From my own experience of trading NBA basketball, opposing a team that had the "hot hand" once a timeout had been called was a longtime profitable trading strategy.  

Earlier in 2010 I had written:

A similar strategy that I use in a few two-team sports is to lay an underdog that gets off to a strong start. Bettors have a tendency to panic (i.e. overreact, or on the flip-side get greedy - fear and greed drive the market) but in the long run, good teams, certainly in sports where timeouts or built in breaks are a feature, tend to come back.

As it happens, that post ended with a tennis observation, but I'm not sure the statistic would have been useful. When trading in-play, interruptions of any kind were always good opportunities to close out a position or take a new one. Injuries can impact games in a big way, and tactical changes and adjustments are also key. 

While sports such as tennis, baseball and American Football have natural breaks in play, ice hockey and basketball don't. There are actually several types of timeout in the NBA, with different rules for locally televised games and nationally televised games. There are mandatory timeouts, there are "full" timeouts, and there are "20-second" timeouts (which are actually 60 seconds) so not all timeouts are equal. 

Managing timeouts and the clock in the NFL is a key part of the game, while in the NHL, only one 30-second timeout is allowed per team, per game. 

I look forward to seeing a study comparing all the different timeouts!