Abstract

http://ssrn.com/abstract=705590
 
 

References (28)



 
 

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Overconfidence vs. Market Efficiency in the National Football League


Cade Massey


University of Pennsylvania - The Wharton School

Richard H. Thaler


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

April 2005

NBER Working Paper No. w11270

Abstract:     
A question of increasing interest to researchers in a variety of fields is whether the incentives and experience present in many "real world" settings mitigate judgment and decision-making biases. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which incentives are exceedingly high and the opportunities for learning rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the "right to choose" in the draft -- non-regressive predictions, overconfidence, the winner's curse and false consensus all suggest a bias in this direction. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the historical value of drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.

Number of Pages in PDF File: 63

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Date posted: May 31, 2005  

Suggested Citation

Massey, Cade and Thaler, Richard H., Overconfidence vs. Market Efficiency in the National Football League (April 2005). NBER Working Paper No. w11270. Available at SSRN: http://ssrn.com/abstract=705590

Contact Information

Cade Massey
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
Richard H. Thaler (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5208 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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