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Does Smart Money Believe In The Hot Hand? Evidence From Daily Fantasy Baseball, Jeremy M. Losak, Andrew P. Weinbach, Rodney J. Paul

Sport Management - All Scholarship

The behavior of informed traders, or 'smart money,' in sports betting markets has long been f interest to researchers. In this paper, we focus specifically on the behavior of smart money in Major league Baseball (MLB) daily fantasy sports (DFS) contests to determine if they avoid cognitive behavioral biases to increase their expected earnings. Specifically, we investigate whether smart money avoids the hot hand bias, where individuals tend to overestimate the likelihood of success for players on a hot streak. Using a dataset of MLB DFS contests, we find that winning lineups have lower usage rates for players exhibiting the …