Hot Hands and Cold Feet

Sports analogies often help us think about how we make investing decisions. Are there streaks in random data? Do past results affect future ones? And most importantly, if you know people have certain biases, what can you do to get a leg up? In this episode, hosts Dan Villalon and Gabe Feghali talk to AQR Principal and Yale professor Toby Moskowitz, who co-authored Scorecasting: The Hidden Influences Behind How Sports Are Played and Games Are Won, about whether or not basketball players on a “hot” streak are more likely to sink their next shot. (Spoiler: They’re not.) The hosts are also joined by special guest Kevin Kelley, coach of the Pulaski Academy High School football team in Little Rock, Arkansas, who explains how statistics have helped his team win in truly unconventional ways. Dan and Gabe tie these sports stories directly to investors and mutual fund managers, who sometimes make investment decisions based on their own “hot” streaks.