A Natural Experiment for Efficient Markets: Information Quality, Behavioral Measurements and Influential Agents
49 Pages Posted: 14 Feb 2018 Last revised: 20 Feb 2018
Date Written: February 2, 2018
We test the integration of repeated decision making behavior of influential agents in asset prices, using Major League Baseball as a unique empirical setting. Our approach exploits a natural experiment in which umpire assignments are revealed only for certain games, and makes use of more than 2.5 million decisions made by these game officials that have influence over game outcomes. Estimations reveal that the totals market only partially adjusts to information related to heterogeneity in umpire decision-making tendencies. We show that this information is exploitable by informed bettors, providing advantages over more salient, lower quality information related to umpire own-lagged game outcomes. These results suggest that underlying individual decision information making can serve as a high quality indicator of asset values due to its persistence across time.
Keywords: Market Efficiency, Betting Markets, Behavior, Baseball
JEL Classification: G14, L83, Z2
Suggested Citation: Suggested Citation