Using Football to Teach Finance
Using Football To Teach Finance
ABSTRACT: Creating student interest is an important, sometimes difficult, task facing all instructors. One way to stimulate students interest is through the use of examples that are interesting and relevant to the students. As the most popular sport in the United States, football provides numerous opportunities for presenting potentially dry, intimidating, academic financial concepts in terms that undergraduate students may find more relevant, understandable, and interesting. In this paper, the author provides football examples to demonstrate various financial topics. These include: using time value of money techniques to examine player contracts; the similarities between specialists and sportsbooks (bookies); bondholder-shareholder conflicts and Hail Mary passes; how IPOs and ticket scalping are similar; gambling and the various forms of market efficiency; real options; and long-term contracts.
INTRODUCTION
Professional football is one of the most popular sports in the United States and offers numerous examples and metaphors that can be used in a finance class. Discussed in this paper are several examples from football that can be used to demonstrate various aspects of finance. It should be stressed that the football examples are not meant to replace traditional examples, but rather to provide students another view at finance topics through a context with which some students may be more familiar. As supplemental learning tools, football examples can be used for a wide range of financial topics. Table 1 (below) lays out a few specific topics and courses where football examples might be used to supplement more traditional cases from the business world. The examples in this table deal with many of the topics typically covered in an undergraduate finance class: the time value of money, market efficiency, the role of specialists, bondholder-shareholder conflicts, IPOs, and real options. A brief discussion of various finance courses where these examples are useful follows the table.
TIME VALUE OF MONEY AND PLAYER CONTRACTS
For many students, understanding the time value of money is one of the most difficult hurdles that they will encounter in an introductory finance class. Failure to grasp this crucial topic causes many students to do poorly in class and, often, to drop finance for a different major. Part of the problem could be that few introductory finance students can relate to textbook examples on this subject matter. Typical present value examples center on bonds and mortgages, two financial instruments with which the vast majority of traditional undergraduate students have little interest