Moneyball and Major League Teams Pay-Performance: A Case of Valuation Anomaly and Adaptive Market Efficiency?
33 Pages Posted: 9 Mar 2016
Date Written: March 1, 2016
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: Suggested Citation