Gambling for Resurrection: Value and Risk Taking in the National Basketball Association
UNIVERSITY OF TECHNOLOGY, SYDNEY
Finance Discipline Group
Research Seminars in Finance
Topic: Gambling for Resurrection: Value and Risk Taking in the National Basketball Association
Speaker: Phong T. H. Ngo, Australian National University
We study how NBA players’ gambling incentives vary with their contract cycle. A player’s salary is certain when signed to a contract but is highly uncertain as he enters into free-agency. Accordingly, as he nears the end of his contract his risk-taking incentives increase. We show that in the final three-months of his contract, his propensity to play injured increases. In particular, the likelihood of missing a game due to injury falls by 75%, and should time out due to injury be unavoidable, recovery time decreases by 17 days. In the cross-section of player value, we find that, unlike the average player, highly-valued players actually reduce risk-taking.These findings are consistent with the view that a player will adopt ‘bang-bang’ strategies of minimal or maximal risk depending on his inherent value. Finally, we show that for every additional player on a team who is in the last three-months of their contract, the likelihood of the team winning falls by approximately 5%. Our findings are consistent with the ‘gambling for resurrection’ hypothesis propagated in the economics literature.
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A light lunch will be provided in the Staff Room at 1.00 p.m. Please RSVP for catering purposes by accepting this meeting request.
Date: Wednesday, 3rd September 2014
Time: 12.00 p.m. – 1.00 p.m.
Venue: University of Technology, Sydney