NBA stock: 2016 is a highly volatile year!

Some things never change.

I haven't followed the new 2015-2016 NBA season as closely as I would have, but it's impossible to ignore that our two finalists from last years are still dominating their conferences, San Antonio keeps chugging along as it has always done since like forever, and similarly to last year the Lakers and 76ers are in for a terrible season if the first 20% of the season is any indication.

That being said, there is a rather lengthy list of surprises, good and bad:

• The Knicks were plain awful last year but now have a winning record
• The Rockets and Clippers gave us an intense Western Conference semifinals yesterday both playing at a very high level but both now have losing records
• The Hawks dominated the Eastern Conference last year yet are now ranked 6th in that same conference
• The Pelicans made the Playoffs last year but this year are playing just slightly better than the Lakers
• The Jazz were ranked 11th in the Western Conference last year, and are now ranked second

I could go on, but you get the idea. Now of course, nobody would expect every season to be an exact replicate of the previous one, players get injured, players transfer, coaches come and go... So some volatility in rankings is expected, but the question is how much?

Going back up to the 2005-2006 season, I pulled final regular season rankings for each season and each team (taking relocations into account for the Sonics, Bobcats and Hornets), and looked at absolute change from year to year. For instance, the Toronto Raptors finished 10th of the Eastern Conference in 2012-2013, 3rd in 2013-2014, 4th in 2014-2015. This would therefore be counted as a change of 7, followed by a change of 1 in conference ranking. Rank changes were averaged across all teams for each year. Here's the evolution of average rank change across all teams:

It appears that my hunch was not entirely unfounded: as of today (2015-11-24), current rankings have never been as different from the previous year going back to 2005-2006! (of course the season has only kicked off, and we are not entirely comparing apples to apples). 2014 was a close second, when 6 out of 30 teams had their conference rankings change by 7 or more positions.

What if we were to split out results for each conference?

It appears that the Eastern Conference is typically much more volatile than than its western counterpart. Up until 2014-2015, the Western Conference had never had an average rank change exceeding 3.2, a value that the Eastern Conference exceeded 5 times in the last 9 years! But comparing the first 15 games of the 2015-2016 season to last year's final standings, we have an average rank change of 4, tying the maximum value ever observed in either conference.

To finish off, it would be interesting to put these values in context and evaluate how much carry-over there is from one season to the next. Is an average of 3 or 4 rank changes per team high? or low? Our baseline would be a completely randomized basketball association where players are completely reshuffled from one year to the next and so each year's ranking is entirely random. I ran 100,000 simulations to see what the expected number of rank changes would be.

It turns out that a value of 4 is not particularly extreme: in our purely randomized world, about 15% of seasons would be less volatile rank-wise than what we are witnessing today!

I've spent quite some time running basketball analyses, from the number of expected runs and the incremental value of home court advantage to trying to forecast game outcomes based on team performance, yet it seems my conclusion is always the same: there is so much statistics can uncover, no matter what approach you take there always seems to be a strong unexplained random component which makes every team, every season, every championship so unique!