A Visible (Hot) Hand? Expert Players Bet on the Hot Hand and Win

Abstract

Since its inception, the hot hand fallacy literature has tended to focus on whether the hot hand exists, rather than the fitness of hot hand beliefs. We provide the first evidence that people---here experienced practitioners---can profitably exploit their hot hand beliefs. In particular, using the data from the original hot hand field study we find that players' bets predict future outcomes. We use simulations to demonstrate how under-powered tests and misinterpreted effect sizes led the original study to the opposite conclusions