A Natural Experiment for Efficient Markets: Information Quality, Behavioral Measurements and Influential Agents
54 Pages Posted: 14 Feb 2018 Last revised: 9 Apr 2018
Date Written: March 23, 2018
We test the integration of repeated decision making of influential agents in asset prices. Our approach exploits a natural experiment in the MLB betting market, in which umpire assignments are revealed only for certain games, using over 2.5 million influential decisions made by these officials. Estimations reveal only partial adjustment to information related to umpire behavioral heterogeneity. We show that this is exploitable by informed bettors, providing advantages over more salient, lower quality information. These results suggest underlying information on influential individual decision making can serve as a high quality indicator of asset values due to its persistence across time.
Keywords: Market Efficiency, Betting Markets, Behavior, Baseball
JEL Classification: G14, L83, Z2
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