Luck doesn't factor into a team's rating. It's a metric that compares a team's record to what they deserved based on their game-by-game efficiency.
If a team is involved in a lot of close games, it shouldn't win or lose all of them. If a team wins all of the close games, they're viewed as a lucky. An unlucky team would lose all of their close games.
Luck is measured using Dean Oliver's correlated Gaussian method.
If this sounds complicated, it definitely is.
Oliver explains it as something similar to a bell curve.
Luck = NORM (AdjOE - AdjDE) / SD(Rating Difference)
| (Rtg-Opp.Rtg) |Win% = NORM |-----------------------------------|| SD(Rating Difference) |
Rtg: points scored per 100 possessions (offensive rating)
Opp.Rtg: points allowed per 100 possessions (defensive rating)
SD(): statistical standard deviation of quantity in parentheses ()
Var(): statistical variance of quantity in parentheses ()
Cov(): statistical covariance of quantities in parentheses ()
Luck tells you the difference between a team's expected winning percentage and its actual winning percentage.
Luck doesn't use Pythagorean Winning Percentage (Pyth) as the expected winning percentage. Pyth is calculated by a team's offensive and defensive efficiencies.
The correlated Gaussian method uses the distribution of a team's game efficiencies to determine the expected winning percentage. It includes both the average margin of victory and the variation in a team's margin of victory.
This method takes into account that the majority or teams play to the level of their competition.
In the 2017-2018 season, UMBC was viewed as the second luckiest team in Division-I.
UMBC was 25-11. Its actual winning percentage was 0.694.
Using the correlated Gaussian method, UMCB's expected winning percentage was 0.57.
UMBC's actual winning percentage is 0.125 points higher than its expected. This translates into roughly 5 wins that are attributed to luck.
If you take a glance at UMBC's results, the Retrievers won 7 games by 5 points or less, which can be viewed as lucky.
In comparison, the 2017-2018 Wake Forest Demon Deacons squad team finished 11-20. Wake Forest ranked 350th out of 351 teams in luck.
Wake Forest's actual winning percentage was 0.35.
It's expected winning percentage using Oliver's method was 0.47.
This is -0.120 points lower than expected. This means about 4 losses were attributed to luck.
Taking a look at Wake Forest's game-by-game results, you'll find 5 losses by a 5 points or less. This can be seen as unlucky.
Luck isn't used when rating a team. It gives you an idea on how a team performs in close game and how it plays to its competition.
A very lucky team will likely be rated lower by KenPom.
Where an extremely unlucky team could be rated higher.
Using our example above, UMBC (lucky) was 166th in the final 2017-2018 KenPom ratings.
While Wake Forest (unlucky) was 89th in the final 2017-2018 KenPom ratings.