Swartz: Do teams still overpay for free agents from other teams?

From SABR member Matt Swartz at FanGraphs on July 21, 2017:

When I tell people about my side career as a baseball analyst, they frequently ask me of what research I’m most proud. The answer? The work I did establishing that teams receive fewer WAR per Dollar when signing free agents away from other teams than when re-signing their own players.

My clearest and most thorough analysis of this topic came in the 2012 Hardball Times Annual. The results were initially met with strong skepticism when I published a post on the topic at Baseball Prospectus back in 2010. It took a couple years of evidence before I was able to persuade the sabermetric community that it was true — and, more importantly, that the reason for this phenomenon was that teams re-signing their own players had better information on them.

My 2012 Hardball Times Annual article tested and confirmed that this held true for a variety of players. Traded MLB players and traded minor-league prospects both tended to underperform their projections when compared to untraded players.

What’s the significance of this discovery? Generally speaking, it means that an “average” player who reaches free agency is overvalued by his projections relative to another “average” player who doesn’t reach free agency. So much of sabermetric analysis involves looking at free agents. Suddenly, I had research indicating that such analysis was based on a biased sample. The results immediately colored every potential free-agent signing. With every free agent I encountered afterward, I began asking myself: “is there some reason this player’s original team let him go?”

Read the full article here: http://www.fangraphs.com/blogs/do-teams-still-overpay-for-free-agents-from-other-teams/

Originally published: July 21, 2017. Last Updated: July 21, 2017.