The Hot-Hand Fallacy: Cognitive Mistakes or Equilibrium Adjustments? Evidence from Major League Baseball

Management Science (Forthcoming)

64 Pages Posted: 24 Nov 2013 Last revised: 19 May 2017

See all articles by Brett S. Green

Brett S. Green

Washington University in St. Louis - John M. Olin Business School

Jeffrey Zwiebel

Stanford Graduate School of Business

Date Written: March 17, 2017

Abstract

We test for a "hot hand'' (i.e., short-term predictability in performance) in Major League Baseball using panel data. We find strong evidence for its existence in all ten statistical categories we consider. The magnitudes are significant; being "hot" corresponds to between one-half and one standard deviation in the distribution of player abilities. Our results are in notable contrast to the majority of the hot-hand literature, which has found little to no evidence for a hot hand in sports, often employing basketball shooting data. We argue that this difference is attributable to endogenous defensive responses: basketball presents sufficient opportunity for transferring defensive resources to equate shooting probabilities across players whereas baseball does not. We then document that baseball teams do respond to recent success in their opponents' batting performance. Our results suggest that teams use recent performance in a manner consistent with drawing a correct inference about the magnitude of the hot-hand, except for a tendency to overreact to very recent performance (i.e., the last 5 attempts).

Keywords: Streakiness, hot hand, behavioral economics

JEL Classification: G14, L83

Suggested Citation

Green, Brett S. and Zwiebel, Jeffrey H., The Hot-Hand Fallacy: Cognitive Mistakes or Equilibrium Adjustments? Evidence from Major League Baseball (March 17, 2017). Management Science (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2358747 or http://dx.doi.org/10.2139/ssrn.2358747

Brett S. Green (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Jeffrey H. Zwiebel

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-2917 (Phone)
650-725-7979 (Fax)

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