Smart Money in the NCAA Men’s Basketball Tournament

Although bracket pools in the NCAA Men’s Basketball Tournament are a game, in practice most players do not compete strategically. Instead, they are more likely to choose brackets as though they are playing a lottery. When faced with such unsophisticated opponents, the game simplifies to a finance problem where you must choose an optimal portfolio of brackets. The brackets that pay the highest return are modal brackets in which higher seeds are always picked to beat lower seeds until the Final Four. When playing multiple brackets, the optimal strategy is to diversify across possible winners in the first round of the Final Four. We have found both theoretically and empirically that enormous returns can be earned with this approach.