Tests of Racial Discrimination in a Simple Financial Market: Managers in Major League Baseball

Rodney Paul,Andrew Weinbach,Justin Mattingly

doi:10.3390/ijfs6010024

Abstract

This study tests for racial discrimination against minority managers in Major League Baseball using financial-market imbalances as it relates to the wagering marketplace for the sport. Using detailed betting data on the percentage bet on the favorite from Sports Insights, we test for prejudice against minority mangers using an ordinary least squares multiple regression model. The results reveal that bettors have a clear preference for the favored team as the percentage bet on the favorite increases with the odds on the favorite. In addition, they prefer road favorites by an even greater margin. In terms of minority managers, there is no evidence of discrimination against minorities. In fact, bettors prefer to wager on minority managers by a statistically significant margin when they are favorites. This finding suggests that either the participants in this financial marketplace are not prejudiced against minority managers or the financial incentives inherent in the market drive out discrimination against the minority managers.

Highlights

Sports wagering markets are simple financial markets that have been advantageous to the study of finance and economics due to their popularity, clear and straightforward framework, quick realization of returns, and the ease of testing market efficiency (Sauer 1998)
Miguel Gonzalez was the first Hispanic manager in Major League Baseball (MLB) history, he only served as interim manager in 1938 and 1940, while Preston Gomez was the first Latin American manager to manage from the beginning of a season
The goal of this research was to test for racial biases against minority coaches in the betting market for Major League Baseball

Summary

Introduction

Sports wagering markets are simple financial markets that have been advantageous to the study of finance and economics due to their popularity, clear and straightforward framework, quick realization of returns, and the ease of testing market efficiency (Sauer 1998). Betting markets serve as a prime place for studying behavioral biases as sports bettors are often emotional and attached to their favorite teams and players. Past studies showed behavioral biases of sports bettors in different ways, such as their preference for the best teams (i.e., Levitt 2004; Humphreys et al 2013), but this study takes the study of behavioral bias in a different direction, to that of race. Major League Baseball (MLB) is a sport that has a long history as it relates to race and society. The story of Jackie Robinson breaking the color barrier is well-known and plays an important part in history in general, not just in relation to sports. Frank Robinson, former player and winner of the Most Valuable Player award in both the National and American Leagues, became the first African-American manager in 1974. Miguel Gonzalez was the first Hispanic manager in MLB history, he only served as interim manager in 1938 and 1940, while Preston Gomez was the first Latin American manager to manage from the beginning of a season

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Conclusion