Testing Bayesian Updating with the AP Top 25

Economic Inquiry, Forthcoming

38 Pages Posted: 11 Jul 2008 Last revised: 21 Jul 2011

Daniel F. Stone

Bowdoin College - Department of Economics

Date Written: July 1, 2011

Abstract

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

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

Daniel F. Stone (Contact Author)

Bowdoin College - Department of Economics ( email )

Brunswick, ME 04011
United States
6463387833 (Phone)

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