Wednesday, May 11, 2016

Brief Look at Prospect Theory and Disposition Effect in Fantasy Football Player Trading.


Brief Look at Prospect Theory and Disposition Effect in Fantasy Football Player Trading. 

I will add this in an expanded form into my 2017 edition of my drafting manual but I have been thinking about this for a while and wanted to get it out. 

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Quoting from

Behavioral Finance: Key Concepts - Prospect Theory
By Albert Phung

"In 1979, Kahneman and Tversky presented an idea called prospect theory, which contends that people value gains and losses differently, and, as such, will base decisions on perceived gains rather than perceived losses. According to prospect theory, losses have more emotional impact than an equivalent amount of gains."

The theory suggests that this process is asymmetric and in fantasy football the behavior would be in play during the in-season trading of players and picks. So the trading away of a early bust-type player that goes on to be a stud instead would have a more dramatic impact on the league manager than a player they drafted and went on to have a stud season.

See Figure 1

Fantasy Football Player Trade










The disposition effect that would result from this behavior in consideration of losses vs. wins in player trading.

This effect would imply that in fantasy football player trading, players would tend to hold onto poor preforming players for too long and trade better players way too soon.

You hear on podcasts and radio shows to wait for the bust type of player to have a good week and then trade him. That makes sense but what if the bust player does not have a good week! Losses and feelings get much worse.

So you now are aware of the "feelings" you may have in trading considerations. 

Remember 

Fantasy Players are less willing to 

recognize losses in trading players but 

are more willing to recognize gains.


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