Overconfidence vs. Market Efficiency in the National Football League / Cade Massey, Richard Thaler.

Format:

Book

Author/Creator:

Massey, Cade.

Contributor:

National Bureau of Economic Research.

Thaler, Richard.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11270.

NBER working paper series no. w11270

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

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.

Notes:

Print version record

April 2005.