Reference Points, Prospect Theory, and Momentum on the PGA Tour

Abstract

Pope and Schweitzer (AER, 2011) study predictions of prospect theory for the reference point of par on the current hole in professional golf. We study prospect theory predictions for three other plausible reference points: par for recent holes, for the round, and for the tournament. A potentially competing force is momentum in quality of play, i.e., the hot or cold hand. While prospect theory predicts negative serial correlation in better (worse)-than-average performance across holes, the hot (cold) hand implies the opposite.We find evidence that, for each of the reference points we study, when scores are better than par, hot hand effects are dominated by prospect theory effects. These effects can occur via two mechanisms, greater conservatism or less effort; we find evidence that the former (latter) dominates for scores closer to (further from) the reference point. We also find evidence of prospect theory effects (greater risk-seeking) when scores are worse than par for the round in Round 1, and of cold hand effects for scores worse than par for the tournament in Round 3. The magnitudes of some of the joint effects are comparable to those found by Pope and Schweitzer and other related papers. We conclude by discussing how, rather than compete, prospect theory and cold hand forces might also cause one another.

Rank and Performance in Dynamic Tournaments: Evidence From the PGA Tour

“…The specification in column 3 utilizes player-par value fixed effects. Stone and Arkes (2016) suggest that, since players differ in their ability to play long and short holes, the introduction of these fixed effects can improve the model. This yields results similar to those using player fixed effects.…”

“… 2. See Balsdon (2013); Fearing, Acimovic, and Graves (2011); Hickman and Metz (2015); Hickman and Metz (2018); Pope and Schweitzer (2011); and Stone and Arkes (2016) as recent examples. …”

Comparative Analysis of Pitch Ratings in All Formats of Cricket

“…The Prospect Theory has been used extensively in economics, marketing and finance (Barberis, 2013). In sports, it has been extensively used to understand the failure of certain rules like the three-point rule to avoid draws in soccer (Riedl et al, 2015), and the momentum of players in the PGA golf tours (Stone & Arkes, 2016). It has also been used to a great extent in the field of sports betting (Yu et al, 2022) and sports-based physical fitness and other behavioural Above Average 'Lacks carry, bounce or occasional seam movement any or all three, however, shows somewhat consistency for carrying and bounce.…”

Do (Australian) jockeys have hot hands?

“…A considerable literature on hot hands has arisen in the three decades since Gilovich et al (1985) brought the concept from sports folklore into the realm of academic research. 4 The sports covered include basketball (Arkes, 2013; Daks et al, 2018; Gilovich et al, 1985; Paul and Weinbach, 2005), golf (Clark, 2003; Gilden and Wilson, 1995; Livingston, 2012; McFall et al, 2009; Stone and Arkes, 2016), volleyball (Raab et al, 2012), baseball (Albert, 1993; Albright, 1993; Green & Zwiebel, 2018), bowling (Dorsey-Palmateer and Smith, 2004), National Football League (Paul et al, 2012), darts (Otting et al, 2018) and even horseshoe pitching (Smith, 2003). 5 The results have been mixed.…”