On the Efficiency of Trading Intangible Fixed Assets in Major League Baseball

This paper proposes novel approaches to measuring team productivity and evaluating trading efficiency in Major League Baseball (MLB) from 1994-2016. Player performance is measured using a structural approach relating player outcomes to team runs. Using a portfolio theory framework, we treat MLB teams as portfolios of players (assets), each of which can be defined by an expected value and variance of their runs per game contribution. Trading efficiency between teams is evaluated given team level pre-trade expected values and variances and the traded player’s pre-trade expected value and variance. We find that trade efficiency has improved substantially over our timeframe