Initial Public Offerings of Ballplayers
AbstractAs a field study of choice under uncertainty, we examine baseball teams' investments in amateur players. Though most prospects fail to deliver any return on their multi-million dollar signing bonuses, returns on the minority who succeed easily offset these losses: the expected annual yield on the median first-round draftee is 33 percent. However, the pattern of returns is inconsistent with market efficiency. Yields are lower for high schoolers than collegians (27 percent vs. 43 percent), lower for pitchers than position players (24 percent vs. 41 percent), decline for later round long-shots, and may be negative under competitive bidding.
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Bibliographic InfoPaper provided by International Association of Sports Economists & North American Association of Sports Economists in its series Working Papers with number 0624.
Length: 37 pages
Date of creation: Oct 2006
Date of revision:
Market efficiency; Bounded rationality; Prospect theory; Winner’s curse;
Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-04 (All new papers)
- NEP-EXP-2006-11-04 (Experimental Economics)
- NEP-UPT-2006-11-04 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jay Ritter & Ivo Welch, 2002.
"A Review of IPO Activity, Pricing and Allocations,"
Yale School of Management Working Papers
ysm258, Yale School of Management, revised 01 Apr 2002.
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- Colin Camerer, 1998. "Bounded Rationality in Individual Decision Making," Experimental Economics, Springer, vol. 1(2), pages 163-183, September.
- Samuel H. Dinkin & James C. Cox & Vernon L. Smith, 1999. "The Winner's Curse and Public Information in Common Value Auctions: Comment," American Economic Review, American Economic Association, vol. 89(1), pages 319-324, March.
- John D. Burger & Stephen J.K. Walters, 2005. "Arbitrator Bias and Self-Interest: Lessons from the Baseball Labor Market," Journal of Labor Research, Transaction Publishers, vol. 26(2), pages 267-280, January.
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