April 04, 2018 07:06AM | Registered: 14 years ago Posts: 12,233 Status: HOF Inductee |
Quote
The Loser’s Curse: Overconfidence vs. Market Efficiency in the National Football League Draft∗
Cade Massey
Duke University Fuqua School of Business
Richard H. Thaler University of Chicago Graduate School of Business
April 2, 2005
Abstract
A question of increasing interest to researchers in a variety of fields is whether the incentives and experience present in many “real world” settings mitigate judgment and decision-making biases. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which incentives are exceedingly high and the opportunities for learning rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the “right to choose” in the draft – non-regressive predictions, overconfidence, the winner’s curse and false consensus all suggest a bias in this direction. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the historical value of drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.
Subject | Author | Views | Posted |
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The NE Patriots' obsession with second-round draft picks is a brilliant strategy | laram | 430 | April 04, 2018 06:50AM |
Old news, was done over 18 years ago | max | 205 | April 04, 2018 07:06AM |