A Cold Shower for the Hot Hand Fallacy

The hot hand fallacy has long been considered a massive and widespread cognitive illusion with important economic consequences. While the canonical domain of the fallacy is basketball, which continues to provide its strongest and most readily generalizable supporting evidence, the fallacy has been considered as a candidate explanation for various economic and financial anomalies. We find, in its canonical domain, that the belief in the hot hand is not a fallacy, and that, surprisingly, the original evidence supports this conclusion. Our approach is to design a controlled shooting field experiment and develop statistical measures that together have superior identifying power over previous studies. We find substantial evidence of the hot hand, both in our study and in all extant controlled shooting studies, including the seminal study (which found the opposite result, and coined the term ``the hot hand fallacy''). Also, we observe the hot hand effect to be heterogeneous across shooters, which suggests that decision makers (e.g. players and coaches) may have incentive to identify which shooters have a greater tendency to become hot. Accordingly, we find evidence that expert players (teammates) can do so. In light of these results, we reconsider the economic relevance of the hot hand fallacy more generally.