Performance Perspectives Blog

Annualizing home runs and performance

by | Apr 8, 2010

The start of the baseball  season never disappoints in providing metaphorical examples to use relative to performance measurement. Watching ESPN this morning an announcer commented on St. Louis Cardinals’ Albert Pujols’ early season home run success, pointing out that if he continues at this pace he’ll have 324 for the year, “shattering his career season record.” That would be quite a feat. And this mathematical exercise conducted after only one game into a 162 game season. Usually I have to wait about a month to find examples; this has to be a record in prognostication.

I won’t be betting on Albert continuing at this pace. But this is one of the reasons why we don’t annualize returns for periods less than a year. If a manger has a fantastic January, to annualize it for a year would suggest that he is able to continue at this pace for the next 11 months (plus violate the rule about past performance not being a predictor of future outcomes).