The Hot Hand Fallacy: Cognitive Mistakes or Equilibrium Adjustments? Evidence from Baseball

We test for a ‘hot hand’ (i.e., short-term streakiness in performance) in Major League Baseball using panel data. We find strong evidence for its existence in all ten statistical categories we consider. The magnitudes are significant; being ‘hot’ corresponds to roughly a one quartile increase in the distribution. Our results are in notable contrast to the majority of the hot hand literature, which has found little to no evidence for a hot hand in sports, often employing basketball shooting data. We argue that this difference is attributable to endogenous defensive responses: basketball presents sufficient opportunity for defensive responses to equate shooting probabilities across players whereas baseball does not. As such, prior evidence on the absence of a hot hand (despite widespread belief in its presence) should not be interpreted as a cognitive mistake — as it typically is in the literature — but rather as an efficient equilibrium adjustment. We provide a heuristic manner for identifying a priori which sports are likely to permit an equating endogenous response response and discuss potential implications for identifying the hot hand effect in other settings.