Moneyball and Major League Teams Pay-Performance: A Case of Valuation Anomaly and Adaptive Market Efficiency?

33 Pages Posted: 9 Mar 2016

See all articles by Ramy Elitzur

Ramy Elitzur

University of Toronto - Rotman School of Management

Date Written: March 1, 2016

Abstract

An often discussed concept in accounting is the pay-performance relation, particularly with respect to executive compensation (known as pay-performance sensitivity, or PPS). This study explores the pay-performance relation in major league baseball teams, focusing on player payroll and its effects on teams’ performance. Moneyball (2003) exposed readers to the use of advanced analytics, or Sabermetrics, in baseball and how it improved the ‘bang for the buck’ in selecting baseball players and in managing games. It also offered the seductive idea that quantitative geeks could beat jocks in baseball personnel decisions. The study also contributes to the accounting literature on adaptive market efficiency and vanishing pricing anomalies by testing whether the use of Sabermetrics has indeed provided an unfair advantage to teams and general managers and, more importantly, whether the outing of these ideas has made the Moneyball effect go away.

Keywords: Pay-Performance, Valuation Anomalies, Adaptive Market Efficiency, MoneyBall, Baseball, Sabermetrics, Sport Analytics

JEL Classification: L83, M12, M41, C33, G14

Suggested Citation

Elitzur, Ramy, Moneyball and Major League Teams Pay-Performance: A Case of Valuation Anomaly and Adaptive Market Efficiency? (March 1, 2016). Available at SSRN: https://ssrn.com/abstract=2743852 or http://dx.doi.org/10.2139/ssrn.2743852

Ramy Elitzur (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
156
Abstract Views
1,175
rank
206,544
PlumX Metrics