March Madness? Underreaction to Hot and Cold Hands in NCAA Basketball

Abstract

The hot hand bias is the widely documented bias toward overestimation of positive serial correlation in sequential events. We test for the hot hand bias in a novel real-world context, NCAA basketball tournament seeds. The seeds are determined by a committee that only has implicit incentives, but the committee’s decisions are highly scrutinized by the media, fans, and other stakeholders. We find that, contra the hot hand bias, the committee underreacts to signals of momentum heading into the NCAA tournament. We note that the NCAA tournament has been highly popular and lucrative partly due to the “madness” (high frequency of wins by lower-seeded teams), which the bias we document contributes to.