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A natural experiment for efficient markets: Information quality and influential agents

Brian Mills () and Steven Salaga

Journal of Financial Markets, 2018, vol. 40, issue C, 23-39

Abstract: We test the integration of repeated decision making of influential agents in asset prices. Our approach exploits a natural experiment in the Major League Baseball (MLB) betting market, where umpire assignments are revealed only for certain games, using over 2.5 million decisions made by these officials. Estimations reveal only partial adjustment to information related to umpire behavioral heterogeneity. We show this is exploitable by informed bettors, providing advantages over more salient, lower quality information. These results suggest that underlying information on influential individual decision making can serve as a high quality indicator of asset values due to persistence across time.

Keywords: Market efficiency; Betting markets; Behavior; Baseball (search for similar items in EconPapers)
JEL-codes: G14 L83 Z2 (search for similar items in EconPapers)
Date: 2018
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