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Is There a Differential Market Size Effect in U.S. Free Agent Signings? Evidence From Localized Sentiment Trading

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  • Aigbe Akhigbe
  • Melinda Newman
  • Ann Marie Whyte

Abstract

We consider three professional sports and examine if there is a disparate return response to free agent signings with small versus big market franchises. After controlling for player ability, contract characteristics, and negotiation conditions, we find evidence of a more pronounced negative small market effect in response to both basketball and baseball signings, and a more pronounced negative big market effect in response to football signings. Our results suggest that differential market size sensitivities are complex, reflecting the influence of factors such as player ability and compensation in ways that are highly nuanced and unique to each league.

Suggested Citation

  • Aigbe Akhigbe & Melinda Newman & Ann Marie Whyte, 2021. "Is There a Differential Market Size Effect in U.S. Free Agent Signings? Evidence From Localized Sentiment Trading," Journal of Sports Economics, , vol. 22(6), pages 678-721, August.
    • Handle: RePEc:sae:jospec:v:22:y:2021:i:6:p:678-721
    DOI: 10.1177/15270025211007193
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