A Visible (Hot) Hand? Expert Players Bet on the Hot Hand and Win

17 Pages Posted: 8 Sep 2017 Last revised: 29 Apr 2018

See all articles by Joshua B. Miller

Joshua B. Miller

University of Melbourne - Department of Economics

Adam Sanjurjo

Universidad de Alicante - Departamento de Fundamentos del Análisis Económico

Date Written: December 15, 2017

Abstract

Belief in the hot hand -- positive momentum in performance -- has often been quickly dismissed as fallacious since the canonical, and highly influential, hot hand fallacy paper was written over 30 years ago. For better or worse, subsequent research has often focused on hot hand performance rather than beliefs. It is perhaps due to these reasons that there exists no direct evidence that it can be beneficial to hold hot hand beliefs. We provide the first evidence that people -- here experienced practitioners -- can profitably exploit their hot hand beliefs. Further, the data that yields these results is from the field betting task of the canonical hot hand fallacy study. We illustrate how the original authors' analysis led them to the opposite conclusion due to underpowered tests and misinterpreted effect sizes.

Keywords: Hot Hand Fallacy; Betting; Beliefs

JEL Classification: C12; C14; C18;C19; C91; D03; G02

Suggested Citation

Miller, Joshua B. and Sanjurjo, Adam, A Visible (Hot) Hand? Expert Players Bet on the Hot Hand and Win (December 15, 2017). Available at SSRN: https://ssrn.com/abstract=3032826 or http://dx.doi.org/10.2139/ssrn.3032826

Joshua B. Miller (Contact Author)

University of Melbourne - Department of Economics ( email )

111 Barry St.
Melbourne, VIC, 3053
Australia

HOME PAGE: http://joshua-benjamin-miller.com

Adam Sanjurjo

Universidad de Alicante - Departamento de Fundamentos del Análisis Económico ( email )

Campus de San Vicente
Alicante, 03690
Spain

HOME PAGE: http://sites.google.com/site/adamangelsanjurjo/

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