Economic Inquiry, Forthcoming
38 Pages Posted: 11 Jul 2008 Last revised: 21 Jul 2011
Date Written: July 1, 2011
Most studies of Bayesian updating use experimental data. This paper uses a non-experimental data source--the voter ballots of the Associated Press (AP) college football poll, a weekly subjective ranking of the top 25 teams--to test Bayes' rule as a descriptive model. I find that voters sometimes underreact to new information, sometimes overreact, and at other times their behavior is consistent with estimated Bayesian updating. A unifying explanation for the disparate results is that voters are more responsive to information that is more salient (i.e., noticeable). In particular, voters respond in a ``more Bayesian'' way to losses and wins over ranked teams, as compared to wins over unranked teams, and voters seem unaware of subtle variation in the precision of priors.
Keywords: Belief Updating, Overreaction, Underreaction, Salience, Heuristics, College Football Rankings
JEL Classification: D80, D83, D84
Suggested Citation: Suggested Citation
Stone, Daniel F., Testing Bayesian Updating with the AP Top 25 (July 1, 2011). Economic Inquiry, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1158052