The NCAA Men’s Basketball tournament is well known for creating madness among college sports fans. Each year millions tune in to watch the games, with many fans participating in bracket challenges. Bracket challenges have become incredibly popular, with everyone from employers to major sports networks creating their own to see who can pick the tournament champion.

In 2014 Warren Buffett, the billionaire investor, decided to get in on the action by announcing his own bracket challenge. The payout: correctly guess the winner of each of the tournament’s 63 games and win $1 billion. News of the contest dominated media outlets for weeks and thousands of bracket entries poured in, but Buffett had almost nothing to fear because he had statistics on his side.

How likely is it that someone could pick a perfect bracket? Not very. During the 2013 tournament, no one who created a bracket on either Yahoo! or CBS picked more than 50 games correctly, and many seemingly perfect brackets turn sour after the second day of the tournament.

The 2014 tournament involved 68 teams, but brackets only contain 64 teams due to play-in games. To get a perfect bracket a participant would have to pick 63 games correctly (every team that doesn’t win the championship loses one game). Each game has two possible incomes: either Team A wins and Team B loses, or Team B wins and Team A loses. To calculate the total number of ways to fill out a bracket take the total number of possible outcomes for each game (2) and multiply it out 63 times: 2 x 2 x 2….x 2, or 2^63. The odds come in at one in over nine quintillion - odds that don’t seem very promising.

Basketball games are harder to predict than simply flipping a coin, though. Teams in the tournament are assigned a seed, with seeds ranging from 1 to 16. The best teams are given the 1 seed, and the worst teams a 16 seed. The opening games pit seeds against their opposite: a 1 seed plays a 16, a 2 seed plays a 15, etc. History has shown that top seeds don’t lose to bottom seeds often, meaning that the odds of picking one game correctly are actually different than 50/50. This makes calculating the odds of a seeded tournament nearly impossible to figure out, with estimates ranging from 1-in-5 billion to 1-in-128 billion.

Are you filling out a March Madness bracket this year? Better check out Betting On March Madness? Watch Out For The Tax Man.

  1. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  2. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  3. What are some of the more common types of regressions investors can use?

    The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >>
  4. What types of assets lower portfolio variance?

    Assets that have a negative correlation with each other reduce portfolio variance. Variance is one measure of the volatility ... Read Full Answer >>
  5. When is it better to use systematic over simple random sampling?

    Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >>
  6. What are some common financial sampling methods?

    There are two areas in finance where sampling is very important: hypothesis testing and auditing. The type of sampling methods ... Read Full Answer >>
Related Articles
  1. Personal Finance

    5 Ways March Madness Makes Money

    With the popularity of the college basketball tournament, there's a lot of cash changing hands.
  2. Personal Finance

    March Madness Economics

    One of the greatest tournaments in basketball brings in a lot of cash.
  3. Personal Finance

    The March Madness Approach To Investing

    Find out the many similarities between filling your March Madness bracket and filling your portfolio.
  4. Fundamental Analysis

    Using Decision Trees In Finance

    A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to.
  5. Economics

    Understanding Tragedy of the Commons

    The tragedy of the commons describes an economic problem in which individuals try to reap the greatest benefits from a given resource.
  6. Fundamental Analysis

    Return on Investment (ROI) Vs. Internal Rate of Return (IRR)

    Read about the similarities and differences between an investment's internal rate of return (IRR) and its return on investment (ROI).
  7. Economics

    Current Probability of Donald Trump as President

    Predict the current odds of a Donald Trump presidency, and understand the factors that have kept him on top and the looming challenges he faces.
  8. Investing Basics

    Understanding the Random Walk Theory

    The random walk theory states stock prices are independent of other factors, so their past movements cannot predict their future.
  9. Investing Basics

    A Simplified Approach To Calculating Volatility

    Volatility is sometimes greater than anticipated, but the way it’s measured can compound the problems that occur when it’s unexpected.
  10. Investing Basics

    Why Blue Chip Stocks Are Key to Buy-and Hold Investing

    Several blue chip stocks have proven that buy-and-hold investing still works, even after the huge declines of the Great Recession.
  1. Subjective Probability

    A probability derived from an individual's personal judgment ...
  2. Conditional Probability

    Probability of an event or outcome based on the occurrence of ...
  3. Contagion

    The spread of market changes or disturbances from one region ...
  4. Rule Of 72

    A shortcut to estimate the number of years required to double ...
  5. Metrics

    A wide variety of tools that managers and executives can use ...
  6. Qualitative Analysis

    Securities analysis that uses subjective judgment based on nonquantifiable ...

You May Also Like

Hot Definitions
  1. Take A Flier

    The slang term for a decision to invest in highly speculative investments.
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center