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Hot hands and equilibrium

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  • Gil Aharoni
  • Oded H. Sarig

Abstract

Past literature suggests that success rates in professional basketball are independent of past performance and this has been interpreted as evidence that the commonly shared belief in Hot Hands ( HH ) is a cognitive illusion. This is often cited as evidence of biased decision making, even when financial stakes are high. We argue that this interpretation ignores changes in both teams’ behaviour after the detection of an HH player. We derive testable hypotheses that differentiate between HH as a real phenomenon and a cognitive illusion. Analysing an entire NBA season, our results are consistent with HH being a real phenomenon.

Suggested Citation

  • Gil Aharoni & Oded H. Sarig, 2012. "Hot hands and equilibrium," Applied Economics, Taylor & Francis Journals, vol. 44(18), pages 2309-2320, June.
    • Handle: RePEc:taf:applec:44:y:2012:i:18:p:2309-2320
    DOI: 10.1080/00036846.2011.564141
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    1. Robert M. Lantis & Erik T. Nesson, 2019. "Hot Shots: An Analysis of the ‘Hot Hand’ in NBA Field Goal and Free Throw Shooting," NBER Working Papers 26510, National Bureau of Economic Research, Inc.
    2. Robert Lantis & Erik Nesson, 2021. "Hot Shots: An Analysis of the “Hot Hand†in NBA Field Goal and Free Throw Shooting," Journal of Sports Economics, , vol. 22(6), pages 639-677, August.
    3. Joshua B. Miller & Adam Sanjurjo, 2015. "Is it a Fallacy to Believe in the Hot Hand in the NBA Three-Point Contest?," Working Papers 548, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    4. Itzhak Venezia, 2018. "Lecture Notes in Behavioral Finance," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 10751, January.
    5. Brett Green & Jeffrey Zwiebel, 2018. "The Hot-Hand Fallacy: Cognitive Mistakes or Equilibrium Adjustments? Evidence from Major League Baseball," Management Science, INFORMS, vol. 64(11), pages 5315-5348, November.
    6. Miller, Joshua Benjamin & Sanjurjo, Adam, 2018. "A Cold Shower for the Hot Hand Fallacy: Robust Evidence that Belief in the Hot Hand is Justified," OSF Preprints pj79r, Center for Open Science.
    7. Ala Avoyan & Robizon Khubulashvili & Giorgi Mekerishvili, 2020. "Call It a Day: History Dependent Stopping Behavior," CESifo Working Paper Series 8603, CESifo.

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