Determining the level of ability of football teams by dynamic ratings based on the relative discrepancies in scores between adversaries

A rating system provides relative measures of superiority between adversaries. We propose a novel and simple approach, which we call pi-rating, for dynamically rating Association Football teams solely on the basis of the relative discrepancies in scores through relevant match instances. The pi-rating system is applicable to any other sport where the score is considered as a good indicator for prediction purposes, as well as determining the relative performances between adversaries. In an attempt to examine how well the ratings capture a team's performance, we have a) assessed them against two recently proposed football ELO rating variants and h) used them as the basis of a football betting strategy against published market odds. The results show that the pi-ratings outperform considerably the widely accepted ELO ratings and, perhaps more importantly, demonstrate profitability over a period of five English Premier League seasons (2007/2008-2011/2012), even allowing for the bookmakers' built-in profit margin. This is the first academic study to demonstrate profitability against market odds using such a relatively simple technique, and the resulting pi ratings can be incorporated as parameters into other more sophisticated models in an attempt to further enhance forecasting capability.