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The Market Impact of Trends and Sequences in Performance: New Evidence

Authors

  • GREGORY R. DURHAM,

  • MICHAEL G. HERTZEL,

  • J. SPENCER MARTIN

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    • Durham is at the College of Business, Montana State University. Hertzel and Martin are at the W. P. Carey School of Business, Arizona State University. We are grateful for the help and comments of Andres Almazan, Aydogan Alti, Elena Asparouhova, Jeff Coles, Mike Gallmeyer, Lorenzo Garlappi, Jay Hartzell, Steve Heston, S. P. Kothari, Mike Lemmon, Laura Lindsey, Felix Meschke, Tod Perry, and especially an anonymous referee and Rick Green. We also thank seminar participants at the University of Texas at Austin and brown bag participants at Arizona State for their comments.


ABSTRACT

Bloomfield and Hales (2002) find strong evidence that experimental market subjects are influenced by trends and patterns in a manner supportive of the shifting regimes model of Barberis, Shleifer, and Vishny (1998). We subject the model to further empirical scrutiny using the football wagering market as our price laboratory. Sports betting markets have several advantages over traditional capital markets as an empirical setting, and commonalities with traditional markets allow for useful insights. We find scant evidence that investors behave in accordance with the model.

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