Stock Market Anomalies and Baseball Cards

Stock Market Anomalies and Baseball Cards

June 27, 2016 Momentum Investing Research

Last updated on January 18th, 2017 at 03:35 pm

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I still have a Ken Griffey Jr. Rookie Card. To be honest, I don’t even know where the thing is, but I hope it is it worth a ton of money at this point (although I doubt it). So disclaimer up front: I dabbled in baseball card trading back in the day. And for all of you out there who used to trade baseball cards, you’ll enjoy this recent research paper from Joey Engelberg, Linh Le, and Jared Williams. h.t. Quantpedia

Stock Market Anomalies and Baseball Cards

We show that the market for baseball cards exhibits anomalies that are analogous to those that have been documented in financial markets, namely, momentum, price drift in the direction of past fundamental performance, and IPO under performance. Momentum profits are higher among active players than retired players, and among newer sets than older sets. Regarding IPO under performance, we find that newly issued rookie cards under perform newly issued cards of veteran players, and that newly issued sets under perform older sets. Our evidence is consistent with the predictions of Hong and Stein (1999) and Miller (1977).

Here are some key charts:

First, Rookie cards are like IPOs–start out great…and eventual fizzle out. (see Jay Ritter paper for background on IPO underperformance)

ipo and rookie cards

Second, momentum portfolios trading in baseball cards act a lot like momentum portfolios trading in stocks — but the momentum effect is way stronger!

momentum table and baseball cards


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About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray received a PhD, and was a finance professor at Drexel University. Dr. Gray’s interest in entrepreneurship and behavioral finance led him to found Alpha Architect. Dr. Gray has published three books: EMBEDDED: A Marine Corps Adviser Inside the Iraqi Army, QUANTITATIVE VALUE: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors, and DIY FINANCIAL ADVISOR: A Simple Solution to Build and Protect Your Wealth. His numerous published works has been highlighted on CBNC, CNN, NPR, Motley Fool, WSJ Market Watch, CFA Institute, Institutional Investor, and CBS News. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.