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Initial Public Offerings of Ballplayers

Author

Listed:
  • John D. Burger

    (Department of Economics, Loyola College in Maryland)

  • Richard D. Grayson
  • Stephen J.K. Walters

    (Department of Economics, Loyola College in Maryland)

Abstract

As 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.

Suggested Citation

  • John D. Burger & Richard D. Grayson & Stephen J.K. Walters, 2006. "Initial Public Offerings of Ballplayers," Working Papers 0624, International Association of Sports Economists;North American Association of Sports Economists.
    • Handle: RePEc:spe:wpaper:0624
    as

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    File URL: http://web.holycross.edu/RePEc/spe/BurgerWalters_IPO.pdf
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    References listed on IDEAS

    as
    1. Anthony Krautmann, 2009. "Market size and the demand for talent in major league baseball," Applied Economics, Taylor & Francis Journals, vol. 41(25), pages 3267-3273.
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    4. 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.
    5. John D. Burger & Stephen J. K. Walters, 2003. "Market Size, Pay, and Performance," Journal of Sports Economics, , vol. 4(2), pages 108-125, May.
    6. Daniel R. Marburger, 2004. "Arbitrator Compromise in Final Offer Arbitration: Evidence from Major League Baseball," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 60-68, January.
    7. Ritter, Jay R, 1991. "The Long-run Performance of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(1), pages 3-27, March.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Market efficiency; Bounded rationality; Prospect theory; Winner’s curse;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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    This paper has been announced in the following NEP Reports:

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