Hot Hand Fallacy
You watch a basketball player score four three-pointers in a row. When he successfully shoots a fifth one, you believe that the player is actually “on a hot hand” and so he is going to continue to score.
What we think
Sometimes we think that if something is repeatedly happening, it will continue to happen for a certain amount of time. As we previously mentioned with the basketball player, we believe that the more the guy keeps scoring three-pointers, the more the probability of him scoring yet another three-pointer with his next shot increases.
What is the reality
The reality is that, in a random series of events, every event is unique. Previous events do not affect the following ones in any way. So the probability of that event happening does not change.
How it works
The hot hand effect is the belief that if a random event occurs once, it will continue repeating for a period. People believe that if something happens once, twice, then keeps on repeating for a while, that increases the probability of it happening again. So if an event occurs in a series, something works in a magical way. Therefore that particular event will carry on. For instance, according to the hot hand effect, the basketball player who scored four consecutive three-pointers is bound to do so in his next shot, too (i.e. score another three-pointer). What people subconsciously do is that they correlate random events, not taking into account the chance/coincidence factor.
The fundamental error that functions in Gambler’s Fallacy works in hot hand fallacy too. But the latter is somehow opposite to the gambler’s fallacy, where people believe that if a random event happens in a row, there will be a reversal and a series of opposite events will start occurring, for a balance to be established.
Examples and experiments
The hot hand fallacy was first explained in “The Hot Hand in Basketball: On the misperception of random sequences” by Thomas Gilovich, Robert Vallone, and Amos Tversky, published in 1985 . As part of that study, a coin toss experiment was conducted: the participants were supposed to witness a series of tosses, then predict the outcome of the next toss. Interestingly enough, the issue illustrated the effect of two biases: People either tend to believe that there will be a correction on the series, meaning that, after some repeated head or tails results in a row, the opposite possibility is bound to appear next (gambler’s fallacy), or that the coin will ignore probabilities, and it will continue to have the same result, thus leading to the hot hand fallacy.
On the same study, out of 100 basketball fans, 91 believed that players had better chances of making the next shot after they had scored two or three shots in a row than if they had missed.
We come across this bias in stock trading too. According to the “Losers, Winners and Biased Trades” research (conducted by Joseph Johnson, Gerard J. Tellis, and Deborah Macinnis, on September 1st, 2005), who observed the behavior of people when buying and selling stocks, they found out that people tend to sell when the stock starts falling. But if the fall of the stock continues, people continue to sell in due time; they believe that the fall of the stock will continue. Also, the research showed that people tend to buy winning stocks, on the same logic.
How to avoid it, how to gain from it
The rules to avoid it are the same as in the gambler’s fallacy. Think of every event as a unique one, do not try to correlate previous events with following ones on a random series. Moreover, a basic understanding of probability will be helpful. As far as gaining from the hot hand effect is concerned, simply do not waste your time trying to predict the outcome of random events.
Recent studies have shown that the hot hand might actually exist in sports. I won’t go deeper on the matter, as the point of this series of articles and blog is to promote the critical and rational thinking, plus the issue is still dubious. The important thing is that even if the hot hand might work in basketball or baseball, due to psychological or other factors affecting the players, random events that might happen in everyday life significantly rely on pure chance and probabilities, there won’t be something like the hot hand or the gambler’s fallacy.
If you want to read more about the issues discussed in this article, I suggest the following sources:
- “The Hot-Hand Fallacy: Cognitive Mistakes or Equilibrium Adjustments? Evidence from Major League Baseball”, Brett S. Green – Jeffrey Zwiebel, October 12, 2014.
- “The Hot-Hand in Basketball: Fallacy or Adaptive Thinking?” Bruce D. Burns, Department of Psychology, Michigan State University.
- “Is the Hot hand a fallacy?”, RJ Lipton – KW Regan, October 12, 2015.