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Hot Hands in Basketball and Equilibrium

Gil Aharoni

University of Melbourne; Financial Research Network (FIRN)

Oded Sarig

Interdisciplinary Center (IDC) Herzliyah - Adelson School of Entrepreneuship; University of Pennsylvania - The Wharton School

August 1, 2008

EFA 2006 Zurich Meetings

Past literature suggests that success rates in professional basketball are independent of past performance and has been interpreted as evidence that the commonly-shared belief in Hot Hands (HH) is a cognitive illusion. This is often cited as evidence of biased decision-making even when financial stakes are high. We argue that this interpretation ignores changes in both teams behavior after the detection of an HH player. We derive testable hypotheses that differentiate between HH as a real phenomenon and a cognitive illusion. Analyzing an entire NBA season, our results are consistent with HH being a real phenomenon.

Number of Pages in PDF File: 58

Keywords: hot hand, basketball, equilibrium

JEL Classification: D01, D59, D79

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Date posted: February 23, 2006 ; Last revised: September 9, 2008

Suggested Citation

Aharoni, Gil and Sarig, Oded, Hot Hands in Basketball and Equilibrium (August 1, 2008). EFA 2006 Zurich Meetings. Available at SSRN: https://ssrn.com/abstract=883324 or http://dx.doi.org/10.2139/ssrn.883324

Contact Information

Gil Aharoni
University of Melbourne ( email )
185 Pelham Street, Carlton, Victoria 3053
Melbourne, Victoria 3010
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
HOME PAGE: http://www.firn.org.au

Oded H. Sarig (Contact Author)
Interdisciplinary Center (IDC) Herzliyah - Adelson School of Entrepreneuship ( email )
P.O. Box 167
Herzliya, 46150
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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