IDEAS home Printed from https://ideas.repec.org/p/spe/wpaper/0624.html
   My bibliography  Save this paper

Initial Public Offerings of Ballplayers

Author

Listed:
  • John D. Burger

    (Department of Economics, Loyola College in Maryland)

  • Richard D. Grayson
  • Stephen J.K. Walters

    (Department of Economics, Loyola College in Maryland)

Abstract

As a field study of choice under uncertainty, we examine baseball teams' investments in amateur players. Though most prospects fail to deliver any return on their multi-million dollar signing bonuses, returns on the minority who succeed easily offset these losses: the expected annual yield on the median first-round draftee is 33 percent. However, the pattern of returns is inconsistent with market efficiency. Yields are lower for high schoolers than collegians (27 percent vs. 43 percent), lower for pitchers than position players (24 percent vs. 41 percent), decline for later round long-shots, and may be negative under competitive bidding.

Suggested Citation

  • John D. Burger & Richard D. Grayson & Stephen J.K. Walters, 2006. "Initial Public Offerings of Ballplayers," Working Papers 0624, International Association of Sports Economists;North American Association of Sports Economists.
    • Handle: RePEc:spe:wpaper:0624
    as

    Download full text from publisher

    File URL: http://web.holycross.edu/RePEc/spe/BurgerWalters_IPO.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
    2. Samuel H. Dinkin & James C. Cox & Vernon L. Smith, 1999. "The Winner's Curse and Public Information in Common Value Auctions: Comment," American Economic Review, American Economic Association, vol. 89(1), pages 319-324, March.
    3. John D. Burger & Stephen J.K. Walters, 2005. "Arbitrator Bias and Self-Interest: Lessons from the Baseball Labor Market," Journal of Labor Research, Transaction Publishers, vol. 26(2), pages 267-280, January.
    4. John D. Burger & Stephen J. K. Walters, 2003. "Market Size, Pay, and Performance," Journal of Sports Economics, , vol. 4(2), pages 108-125, May.
    5. Anthony Krautmann, 2009. "Market size and the demand for talent in major league baseball," Applied Economics, Taylor & Francis Journals, vol. 41(25), pages 3267-3273.
    6. Daniel R. Marburger, 2004. "Arbitrator Compromise in Final Offer Arbitration: Evidence from Major League Baseball," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 60-68, January.
    7. Ritter, Jay R, 1991. "The Long-run Performance of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(1), pages 3-27, March.
    8. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages 251-278, October.
    9. Colin Camerer, 1998. "Bounded Rationality in Individual Decision Making," Experimental Economics, Springer;Economic Science Association, vol. 1(2), pages 163-183, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John D. Burger & Stephen J. K. Walters, 2009. "Uncertain Prospects," Journal of Sports Economics, , vol. 10(5), pages 485-501, October.
    2. Yin He & Bin Li & Yunhua Tian & Lijun Wang, 2016. "Does Foreign Venture Capital Provide More Value-added Services to Initial Public Offering Companies in China?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(2), pages 90-106, March.
    3. Tsukioka, Yasutomo & Yanagi, Junya & Takada, Teruko, 2018. "Investor sentiment extracted from internet stock message boards and IPO puzzles," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 205-217.
    4. Chan, Kam C. & Li, Guangzi, 2022. "Prior banking relationships and long-term IPO performance," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 123-134.
    5. Yin‐Hua Yeh & Pei‐Gi Shu & Re‐Jin Guo, 2008. "Ownership Structure and IPO Valuation—Evidence from Taiwan," Financial Management, Financial Management Association International, vol. 37(1), pages 141-161, March.
    6. Cho, Jaemin & Lee, Jaeho, 2013. "The venture capital certification role in R&D: Evidence from IPO underpricing in Korea," Pacific-Basin Finance Journal, Elsevier, vol. 23(C), pages 83-108.
    7. Fama, Eugene F. & French, Kenneth R., 2004. "New lists: Fundamentals and survival rates," Journal of Financial Economics, Elsevier, vol. 73(2), pages 229-269, August.
    8. Waqas Mehmood & Rasidah Mohd-Rashid & Yasir Abdullah & Ataul Karim Patwary & Attia Aman-Ullah, 2023. "Inclusive mapping of initial public offerings: a bibliometric and literature review study," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(1), pages 655-700, February.
    9. Mumtaz, Muhammad Zubair & Yoshino, Naoyuki, 2021. "Greenness index: IPO performance and portfolio allocation," Research in International Business and Finance, Elsevier, vol. 57(C).
    10. Grant Fleming & Zhangxin (Frank) Liu & David Merrett & Simon Ville, 2021. "Underpricing in a developing capital market: Australian equity issuances, 1920–39†," Economic History Review, Economic History Society, vol. 74(3), pages 831-855, August.
    11. Ying Xiao & Chris Yung, 2015. "Extrapolation Errors in IPOs," Financial Management, Financial Management Association International, vol. 44(4), pages 713-751, October.
    12. Hatem Mansali & Florence Labégorre, 2010. "Les performances économiques et boursières à long terme des sociétés introduites en bourse:le cas du marché français (1990-2003)," Revue Finance Contrôle Stratégie, revues.org, vol. 13(2), pages 67-106., June.
    13. Vismara, Silvio & Signori, Andrea & Paleari, Stefano, 2015. "Changes in underwriters' selection of comparable firms pre- and post-IPO: Same bank, same company, different peers," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 235-250.
    14. Jeon, Jin Q. & Lee, Cheolwoo & Nasser, Tareque & Via, M. Tony, 2015. "Multiple lead underwriter IPOs and firm visibility," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 128-149.
    15. Peng Cheng & David McMillan, 2015. "Do initial reserves signal long-term IPO stock performance?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1018697-101, December.
    16. Huong Dang & Michael Jolly, 2016. "IPOs in New Zealand: Valuation Multiples and Benchmark Adjusted Performance," Working Papers in Economics 16/32, University of Canterbury, Department of Economics and Finance.
    17. Joshua M. Congdon-Hohman & Jonathan A. Lanning, 2018. "Beyond Moneyball," Journal of Sports Economics, , vol. 19(7), pages 1046-1061, October.
    18. Agoraki, Maria-Eleni K. & Gounopoulos, Dimitrios & Kouretas, Georgios P., 2022. "U.S. banks’ IPOs and political money contributions," Journal of Financial Stability, Elsevier, vol. 63(C).
    19. Oehler, Andreas & Rummer, Marco & Smith, Peter N., 2004. "IPO Pricing and the Relative Importance of Investor Sentiment: Evidence from Germany," Discussion Papers 26, University of Bamberg, Chair of Finance.
    20. Kam Chan & Yung Lo, 2011. "Credit ratings and long-term IPO performance," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 35(4), pages 473-483, October.

    More about this item

    Keywords

    Market efficiency; Bounded rationality; Prospect theory; Winner’s curse;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spe:wpaper:0624. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Victor Matheson (email available below). General contact details of provider: https://edirc.repec.org/data/iaseeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.