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A natural experiment for efficient markets: Information quality and influential agents

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  • Mills, Brian M.
  • Salaga, Steven

Abstract

We test the integration of repeated decision making of influential agents in asset prices. Our approach exploits a natural experiment in the Major League Baseball (MLB) betting market, where umpire assignments are revealed only for certain games, using over 2.5 million decisions made by these officials. Estimations reveal only partial adjustment to information related to umpire behavioral heterogeneity. We show this is exploitable by informed bettors, providing advantages over more salient, lower quality information. These results suggest that underlying information on influential individual decision making can serve as a high quality indicator of asset values due to persistence across time.

Suggested Citation

  • Mills, Brian M. & Salaga, Steven, 2018. "A natural experiment for efficient markets: Information quality and influential agents," Journal of Financial Markets, Elsevier, vol. 40(C), pages 23-39.
  • Handle: RePEc:eee:finmar:v:40:y:2018:i:c:p:23-39
    DOI: 10.1016/j.finmar.2018.07.002
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    Cited by:

    1. Green, Lawrence & Sung, Ming-Chien & Ma, Tiejun & Johnson, Johnnie E. V., 2019. "To what extent can new web-based technology improve forecasts? Assessing the economic value of information derived from Virtual Globes and its rate of diffusion in a financial market," European Journal of Operational Research, Elsevier, vol. 278(1), pages 226-239.
    2. Finigan, Duncan & Mills, Brian & Stone, Daniel, 2019. "Pulling Starters," OSF Preprints te4wg, Center for Open Science.

    More about this item

    Keywords

    Market efficiency; Betting markets; Behavior; Baseball;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z2 - Other Special Topics - - Sports Economics

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