The Effects of Uncertainty on Market Prices: Evidence from Coaching Changes in the NBA |
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| Authors: | L Lee Colquitt Norman H Godwin Rebecca T Shortridge |
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| Institution: | The first author is Professor in the Department of Finance, Auburn University, AL, USA. The second author is Associate Professor, School of Accountancy, Auburn University, AL, USA. The third author is Assistant Professor in the Accountancy Department, Northern Illinois University, DeKalb, IL, USA. |
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| Abstract: | Abstract: This study examines the effects of uncertainty on market prices. Specifically, we use the National Basketball Association betting market to examine whether uncertainty resulting from midseason coaching changes affects the ability of bettors to accurately set betting lines. We find that uncertainty amid midseason coaching changes results in less accurate pricing, as evidenced by higher volatility and greater overall inaccuracy in betting lines. We also find that uncertainty regarding the ability of the replacement coach and/or his strategies results in less accurate pricing, again evidenced by higher volatility and greater overall inaccuracy in betting lines. |
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| Keywords: | betting markets market efficiency price formation |
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