Momentum in Repeated Competition: Exploiting the Fine Line between Winning and Losing

32 Pages Posted: 13 Jun 2019 Last revised: 24 Oct 2019

See all articles by Ercio Munoz

Ercio Munoz

City University of New York (CUNY), The Graduate Center, Department of Economics

Jiadi Chen

Georgetown University - Department of Economics, Students

Milan Thomas

Georgetown University - Department of Economics, Students

Date Written: May 30, 2019

Abstract

Serial correlation in performance has been analyzed extensively in finance and athletic competition. Momentum is an empirically established tendency for asset prices, but the existence of momentum in sports remains an open question. We find evidence of momentum in the National Basketball Association. A regression discontinuity design enables us to identify the causal effect of recent victories. We find a small positive momentum effect overall, but a large negative momentum effect for the playoffs, during which the influence of confounding factors is attenuated. We discuss potential strategic mechanisms behind this finding, and conclude that even within a sports league, the influence of momentum depends on context and incentives.

Keywords: Regression discontinuity design, Momentum, Winner effect, Sports, Natural experiment, Dynamic contests

JEL Classification: C72, C73, Z2

Suggested Citation

Munoz, Ercio and Chen, Jiadi and Thomas, Milan, Momentum in Repeated Competition: Exploiting the Fine Line between Winning and Losing (May 30, 2019). Available at SSRN: https://ssrn.com/abstract=3391748 or http://dx.doi.org/10.2139/ssrn.3391748

Ercio Munoz (Contact Author)

City University of New York (CUNY), The Graduate Center, Department of Economics ( email )

365 Fifth Avenue, 5th Floor
New York, NY 10016
United States

Jiadi Chen

Georgetown University - Department of Economics, Students ( email )

Washington, DC
United States

Milan Thomas

Georgetown University - Department of Economics, Students ( email )

Washington, DC
United States

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