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Is There a Differential Market Size Effect in U.S. Free Agent Signings? Evidence From Localized Sentiment Trading

Aigbe Akhigbe, Melinda Newman and Ann Marie Whyte

Journal of Sports Economics, 2021, vol. 22, issue 6, 678-721

Abstract: We consider three professional sports and examine if there is a disparate return response to free agent signings with small versus big market franchises. After controlling for player ability, contract characteristics, and negotiation conditions, we find evidence of a more pronounced negative small market effect in response to both basketball and baseball signings, and a more pronounced negative big market effect in response to football signings. Our results suggest that differential market size sensitivities are complex, reflecting the influence of factors such as player ability and compensation in ways that are highly nuanced and unique to each league.

Keywords: sentiment trading; localized trading; free agency; small market effect (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1177/15270025211007193

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