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Do NFL teams overvalue their draft picks?
Cade Massey and Richard Thaler say yes:
...we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which incentives are exceedingly high and the opportunities for learning rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the "right to choose" in the draft -- non-regressive predictions, overconfidence, the winner's curse and false consensus all suggest a bias in this direction. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the historical value of drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.
Here is the NBER link; here is a free version of the paper. Here is an article on the biggest NFL draft busts.
Posted by Tyler Cowen on April 21, 2005 at 07:05 AM in Sports | Permalink
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