Reference points, prospect theory and momentum on the PGA tour
Loading...
Authors
Stone, Daniel F.
Arkes, Jeremy
Subjects
Golf
Reference dependence
Prospect theory
Hot hand
Momentum
Reference dependence
Prospect theory
Hot hand
Momentum
Advisors
Date of Issue
2015-12
Date
Publisher
Language
Abstract
Pope and Schweitzer (AER, 2011) study predictions of prospect theory for the reference point of par on the current hole in professional golf. We study prospect theory predictions for three other plausible reference points: par for recent holes, for the round, and for the tournament. A potentially competing force is momentum in quality of play, i.e., the hot or cold hand. While prospect theory predicts negative serial correlation in better (worse)-than-average performance across holes, the hot (cold) hand implies the opposite. We find evidence that, for each of the reference points we study, when scores are better
than par, hot hand effects are dominated by prospect theory effects. These effects can occur via two mechanisms, greater conservatism or less effort; we find evidence that the former (latter) dominates for scores closer to (further from) the reference point. We also find evidence of prospect theory effects (greater risk-seeking) when scores are worse than par for the round in Round 1, and of cold hand effects for scores worse than par for the tournament in Round 3. The magnitudes of some of the joint effects are comparable to
those found by Pope and Schweitzer and other related papers. We conclude by discussing how, rather than compete, prospect theory and cold hand forces might also cause one another.
Type
Article
Description
Series/Report No
Department
Economics
Organization
Naval Postgraduate School (U.S.)
Identifiers
NPS Report Number
Sponsors
Funder
Format
44 p.
Citation
Distribution Statement
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.