Hot Hand

What it is

The “hot hand” describes the belief that after a streak of successes, an individual or team is more likely to continue succeeding. The opposite is the “cold hand”—the idea that a run of failures makes further failures more likely. In reality, whether a streak implies anything about future outcomes depends on whether events are independent or influenced by changing conditions.

Key takeaways

• The hot hand is often a psychological perception rather than a reflection of underlying probability.
• It is commonly linked to the representative heuristic: people expect short sequences to reflect long-run properties.
• Modern analyses find some evidence of true streaks in specific sporting contexts, but results are mixed and context-dependent.
• Believing in a hot hand can trigger biases (overconfidence, confirmation bias, illusion of control, recency bias, hindsight bias) that harm decision-making.

How the hot hand belief forms

People infer patterns from short runs of outcomes and project them forward. Examples:
* Gamblers may assume a run of correct guesses increases their next-child odds.
* Investors may buy or sell based on a fund manager’s recent performance, treating recent success as predictive even when it may not be.

When events are truly independent (e.g., fair coin flips or dice rolls), past outcomes do not change future probabilities. Where outcomes can be affected by behavior, strategy, fatigue, or opponent responses (as in many sports), streaks may sometimes reflect real changes in success probability.

Evidence for and against

Evidence is mixed:

For the hot hand
* Recent statistical work correcting earlier methodological issues has found measurable streak effects in some sports settings. These studies suggest that small-sample biases in older analyses understated real persistence in performance.

Against the hot hand
* Classic research and many intuitive examples emphasize that perceived streaks often arise from random variation and our tendency to see patterns where none exist.
* Even when streaks appear, they may result from situational factors (shot selection, easier attempts, changes in defense) rather than a persistent increase in skill or “luck.”

Interpretation must account for sample size, selection effects, and whether outcomes are statistically independent.

Practical implications

• For investors and gamblers: treat streaks skeptically. Rely on data, adjust for small-sample noise, and beware behavioral biases that follow perceived momentum.
• For sports betting: legalization and market growth make strategies based on streaks more visible. Any approach claiming to exploit a hot hand should be validated with robust, context-specific analysis.
• For managers and analysts: distinguish between genuine performance persistence and changes in circumstances or measurement artifacts before making decisions based on recent runs.

Conclusion

The hot hand captures a common human tendency to infer momentum from short sequences. While some modern research finds limited, context-dependent evidence for real streaks (especially in sports), most situations do not support treating recent success as a reliable predictor without careful analysis. Awareness of cognitive biases and proper statistical scrutiny are essential when evaluating streaks.

Selected research

• Miller, J. B., & Sanjurjo, A. (2018). “Surprised by the hot hand fallacy? A truth in the law of small numbers.” Econometrica, 86(6), 2019–2047.
• Goetzmann, W. N., & Peles, N. (1997). “Cognitive dissonance and mutual fund investors.” Journal of Financial Research, 20(2), 145–158.
• Capon, N., Fitzsimons, G. J., & Prince, R. A. (1996). “An individual level analysis of the mutual fund investment decision.” Journal of Financial Services Research, 10(1), 59–82.