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The Market Impact of Trends and Sequences in Performance: New Evidence

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  • GREGORY R. DURHAM
  • MICHAEL G. HERTZEL
  • J. SPENCER MARTIN

Abstract

Bloomfield and Hales (2002) find strong evidence that experimental market subjects are influenced by trends and patterns in a manner supportive of the shifting regimes model of Barberis, Shleifer, and Vishny (1998) . We subject the model to further empirical scrutiny using the football wagering market as our price laboratory. Sports betting markets have several advantages over traditional capital markets as an empirical setting, and commonalities with traditional markets allow for useful insights. We find scant evidence that investors behave in accordance with the model. Copyright 2005 by The American Finance Association.

Suggested Citation

  • Gregory R. Durham & Michael G. Hertzel & J. Spencer Martin, 2005. "The Market Impact of Trends and Sequences in Performance: New Evidence," Journal of Finance, American Finance Association, vol. 60(5), pages 2551-2569, October.
  • Handle: RePEc:bla:jfinan:v:60:y:2005:i:5:p:2551-2569
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    Cited by:

    1. Choi, Darwin & Hui, Sam K., 2014. "The role of surprise: Understanding overreaction and underreaction to unanticipated events using in-play soccer betting market," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 614-629.
    2. Marshall, Ben R., 2009. "How quickly is temporary market inefficiency removed?," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 917-930, August.
    3. Frieder, Laura, 2008. "Investor and price response to patterns in earnings surprises," Journal of Financial Markets, Elsevier, vol. 11(3), pages 259-283, August.
    4. Joshua B. Miller & Adam Sanjurjo, 2014. "A Cold Shower for the Hot Hand Fallacy," Working Papers 518, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. 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.
    6. Murtha, Brian R., 2013. "Peaking at the right time: Perceptions, expectations, and effects," Organizational Behavior and Human Decision Processes, Elsevier, vol. 120(1), pages 62-72.
    7. Elena Asparouhova & Michael Hertzel & Michael Lemmon, 2009. "Inference from Streaks in Random Outcomes: Experimental Evidence on Beliefs in Regime Shifting and the Law of Small Numbers," Management Science, INFORMS, vol. 55(11), pages 1766-1782, November.
    8. Nikolaos Vlastakis & George Dotsis & Raphael N. Markellos, 2009. "How efficient is the European football betting market? Evidence from arbitrage and trading strategies," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 28(5), pages 426-444.
    9. Wu, Chen-Hui & Wu, Chin-Shun & Liu, Victor W., 2009. "The conservatism bias in an emerging stock market: Evidence from Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 17(4), pages 494-505, September.
    10. Jing Chen, 2005. "Information Theory and Market Behavior," Finance 0503009, EconWPA.
    11. Guillermo Baquero & Marno Verbeek, 2015. "Hedge fund flows and performance streaks: How investors weigh information," ESMT Research Working Papers ESMT-15-01, ESMT European School of Management and Technology.
    12. Roger K. Loh & Mitch Warachka, 2012. "Streaks in Earnings Surprises and the Cross-Section of Stock Returns," Management Science, INFORMS, vol. 58(7), pages 1305-1321, July.

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