A Visible (Hot) Hand? Expert Players Bet on the Hot Hand and Win
17 Pages Posted: 8 Sep 2017 Last revised: 29 Apr 2018
Date Written: December 15, 2017
Abstract
Belief in the hot hand -- positive momentum in performance -- has often been quickly dismissed as fallacious since the canonical, and highly influential, hot hand fallacy paper was written over 30 years ago. For better or worse, subsequent research has often focused on hot hand performance rather than beliefs. It is perhaps due to these reasons that there exists no direct evidence that it can be beneficial to hold hot hand beliefs. We provide the first evidence that people -- here experienced practitioners -- can profitably exploit their hot hand beliefs. Further, the data that yields these results is from the field betting task of the canonical hot hand fallacy study. We illustrate how the original authors' analysis led them to the opposite conclusion due to underpowered tests and misinterpreted effect sizes.
Keywords: Hot Hand Fallacy; Betting; Beliefs
JEL Classification: C12; C14; C18;C19; C91; D03; G02
Suggested Citation: Suggested Citation