Localized sentiment trading in heterogeneous labor markets: evidence from free agent signings

Aigbe Akhigbe, Melinda Newman and Ann Marie Whyte ()
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Aigbe Akhigbe: Miami University
Melinda Newman: The University of Akron
Ann Marie Whyte: University of Central Florida

Review of Quantitative Finance and Accounting, 2022, vol. 58, issue 3, No 12, 1249-1276

Abstract: Abstract We show that free agent signings in U.S. professional sports are associated with localized sentiment trading effects. Responses are influenced by player performance, labor contract and sport structure characteristics unique to each league. Football signings lack guarantees and are noisy signals while the most informative baseball signings reflect player performance. Sentiment effects of basketball signings are mixed. Investors respond positively to contract extension announcements, but negatively to new contract negotiations, with either the current team or a different franchise. Exceptions are for free agents with high performance rankings or who are perceived to improve the odds of winning a championship. We also provide some evidence that sentiment trading is driven primarily by retail investors.

Keywords: Sentiment; Localized trading; Anticipatory trading; Labor contracts (search for similar items in EconPapers)
JEL-codes: G14 G41 J5 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11156-021-01023-x

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