Uncertain Prospects

John Burger and Stephen J. K. Walters
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Stephen J. K. Walters: Loyola College in Maryland, swalters@loyola.edu

Journal of Sports Economics, 2009, vol. 10, issue 5, 485-501

Abstract: This study uses a unique data set and valuation method to quantify returns to teams in baseball’s high-stakes, high-risk amateur draft. Thanks to teams’ monopsony power over draftees and low-seniority players, payoffs on successful picks far outweigh losses on unsuccessful ones: the expected annual yield on the median first-round draftee is 44%. However, the pattern of returns is inconsistent with market efficiency. Expected yields are lower for high school draftees than collegians (36% vs. 57%), lower for pitchers than position players (34% vs. 52%), and decline for later-round long shots.

Keywords: market efficiency; bounded rationality; prospect theory (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:10:y:2009:i:5:p:485-501

DOI: 10.1177/1527002509332350

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