A question came up in Players Talk awhile ago regarding who the most overrated team in the NBA was. It sparked the stat-geek part of my brain and made me curious about a system that could objectively determine which teams were overrated and which were underrated (for my purposes here I use "over/underrated" to refer to a team's actual ability compared to their win record, not necessarily the public's perception of the team). I created a system for answering the question that I think to be very accurate, and I'm going to use this thread to refine, expand, and test it. I plan on updating the lists throughout the season when I get enough time to crunch the numbers.

What I did was use the pythagorean expectation to rank each team according to their "expected" win record based on what they've done so far this season. Pythagorean win records are a pretty common sight in the sport stats world because they give an added context to a team's traditional win/loss column by appropriately crediting the team for big blowouts and close losses. However, I took my rankings a step further by adjusting them based on the strength of schedule each team played compared to an average team. I figured that differences in opponent strength would be a prime reason why a team's true ability might be misrepresented by their win record (sure enough, all of the most overrated teams have played a below-average strength of schedule and all of the most underrated teams with the exception of the Lakers have played an above-average strength of schedule).

Anyway, here's what I came up with:

Most Overrated

1. Atlanta Hawks
2. Charlotte Bobcats
3. Dallas Mavericks
4. Indiana Pacers

Most Underrated

1. Houston Rockets
2. Memphis Grizzlies
3. Los Angeles Clippers
4. Los Angeles Lakers

Naturally I wanted to see how I could use these conclusions to influence my betting (since finding misvalued teams is what sports wagering is all about), so I checked to see if these teams were being over/underrated by the money as well. As it turns out, every team on the Most Overrated list has a losing record against the spread and every team on the Most Underrated list with the exception of the Lakers has a winning record agains the spread. The overrated teams have a combined ATS record of 119-128 (.482) while the underrated teams have a combined ATS record of 140-118 (.543).