Reference points, prospect theory and momentum on the PGA tour
Stone, Daniel F.
MetadataShow full item record
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.
Showing items related by title, author, creator and subject.
McClure, Jason B. (Monterey, California. Naval Postgraduate School, 2004-09);For years, contemporary analysts have stated that Argentine foreign policy has followed incoherent patterns, oscillating back and forth between open support and defiance of the U.S. on a variety of different issues, ...
Yale, G.; Agrawal, B.N. (1994);This paper concerns the cooperative control of multiple manipulators attached to the same base as they reposition a common payload. The theory is easily applied to inertially based problems as well as space based free-floating ...
Stone, Daniel F.; Arkes, Jeremy (2017-07);The hot hand bias is the widely documented bias toward overestimation of positive serial correlation in sequential events. We test for the hot hand bias in a novel real-world context, NCAA basketball tournament seeds. That ...