If Hot Hands Do Exist, What Then?
Momentum strategies look more credible, and market-timing tactics even less so.
Friday’s column discussed how a statistical glitch undermines one of behavioral science’s most widely referenced papers, “The Hot Hand in Basketball: On the Misperception of Random Sequences” (“Hot Hand”). This error, discovered recently, reverses the 1985 paper’s conclusion that basketball players were not likely to make their next shot after scoring on their previous attempts. In fact, they were: One successful shot tended to lead to another.