How Do We Value The Market?

Photo: USAToday.com

In recent free agency periods in Major League Baseball, teams have signed free agent players to exorbitant contracts based on several attributes and skillsets. However, there are some skills that are highly valued, relative to others. The following study, conducted using player statistics and salary data, seeks to determine which skillset teams value most in allocating financial capital to players in the free market of Major League Baseball. Using batting average, on-base percentage, and slugging percentage as a construct, we attempt to correlate different skillsets of broadly defined position groups (infielders, outfielders, and catchers/DH's) to salary allocated.

We start first with the infielder group (first base, second base, shortstop, and third base). We reference the following figures below:

Figure One

Figure Two

Figure Three

Overall, amongst all qualified infielders in this analysis, on-base percentage has the strongest correlation of actual salary, although it is a moderate one. In accordance with Figure One, the correlation coefficient of actual salary and batting average is 0.33. In accordance with Figure Two, the correlation coefficient of actual salary and on-base percentage is 0.43. In referencing Figure Three, the correlation coefficient of actual salary and slugging percentage is 0.38. In the last five free agency periods in Major League Baseball, an infielder’s ability to get on-base is valued in the marketplace, relative to general hitting and hitting for extra bases. On-base skillsets are the most valued amongst infielders and is moderately correlated to actual salaries allocated in baseball.

Now we shift (yes, that was a baseball pun) to outfielders. Our results are displayed in the following charts:

Figure Four

Figure Five

Figure Six

Overall, amongst all qualified outfielders in this analysis, slugging percentage has the strongest correlation of actual salary. In accordance with Figure Four, the correlation coefficient of actual salary and batting average for the position group is 0.37. In accordance with Figure Five, the correlation coefficient of actual salary and on-base percentage is 0.40. In referencing Figure Six, the correlation coefficient of actual salary and slugging percentage is 0.55. In the last five free agency periods in Major League Baseball, an outfielder’s ability to hit for extra bases is valued in the marketplace, relative to general hitting and reaching base. Power hitting abilities are the most valued amongst outfielders and is moderately correlated to salary allocation in the free market of Major League Baseball.

Finally, we focus on two positions in one analysis: catchers and designated hitters (DH's). We focus on the graphs below for our analysis:

Figure Seven

Figure Eight

Figure Nine

Overall, amongst all qualified catchers and designated hitters in this analysis, slugging percentage has the strongest correlation of actual salary. In accordance with Figure Seven, the correlation coefficient of actual salary and batting average for the position group is 0.40. In accordance with Figure Eight, the correlation coefficient of actual salary and on-base percentage is 0.47. In referencing Figure Nine, the correlation coefficient of actual salary and slugging percentage is 0.63. In the last five free agency periods in Major League Baseball, an catcher or D.H.'s ability to hit for extra bases is highly valued in the Major League marketplace, relative to general hitting and on-base abilities.