Does March Madness lead to irrational exuberance in the NBA draft?

 
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The NBA draft is just three months after March Madness every year, and NBA executives have to decide how a player’s performance over the games in March — a maximum of six, from the tournament’s first round to the championship game — should affect their draft decision. Is it possible that a player who can sustain a high level of performance in a few must-win games has demonstrated that he has what it takes to succeed on the highest stage?

A 2012 study for the National Bureau of Economic Research, “Does March Madness Lead to Irrational Exuberance in the NBA Draft? High-Value Employee Selection Decisions and Decision-Making Bias,” explores how the March tournament affects the way that professional teams behave in the June draft. The study is based on data from 1997 to 2010 that looks at college tournament standouts performed at the NBA level. The researchers, Casey Ichniowski of Columbia University Graduate School of Business and Anne E. Preston of Haverford College, sought to understand the relationship between tournament performance and draft position.

The study’s findings include:

  • Tournament performance matters. A player who outperforms his regular season averages or who is on a team that wins more games than its seed would indicate will be drafted higher than he otherwise would have been. “Draft decisions are affected by unexpected team wins and unexpected player scoring.”
  • Professional teams don’t take college tournament performance into consideration as much as they should, as success in the tournament correlates with elite professional accomplishment — particularly top-level success, where a player makes the NBA All-Star Team three or more times. “If anything, NBA teams undervalue the signal provided by unexpected performance in the NCAA March Madness tournament as a predictor of future NBA success.”
  • Teams appear to draft players for offense, not defense: “Draft order is not a significant predictor of defensive performance.”

While NBA executives may be as riveted by March Madness as the average basketball fan, they appear to be overly cautious when weighing its implications. “How collegians perform under the glare of intense media attention and large arena crowds in a lose-and-go-home championship tournament provides important information about the true potential of these players as professional NBA players,” the study states. “Players with positive draft bumps due to unexpectedly good performance in the March Madness tournament are in fact more likely to become one of the rare NBA superstars in the league.”

Tags: sports, entertainment

    Writer: | Last updated: March 21, 2013

    Citation: Ichniowski, Casey; Preston, Anne. "Does March Madness Lead to Irrational Exuberance in the NBA Draft? High-Value Employee Selection Decisions and Decision-Making Bias", NBER Working Paper No. 17928, March 2012. doi:10.3386/w17928.
     

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