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Authors: Vinzant, Patrick L.
Neibergs, J. Shannon
Keywords: claiming horses
financial risk
maximum likelihood
Issue Date: 1999
Abstract: Thoroughbred racehorses are commonly characterized as unprofitable investments. Previous studies, grouping all racehorses together, estimate that over 80% of all racehorses in training fail to earn enough to recover the variable costs of training. However, these studies are not truly representative, because they fail to account for a number of factors affecting profitability. This study estimates expected purse earnings and profitability of claiming horses in Kentucky. Maximum-likelihood estimates of probability distribution parameters show that expected purse earnings follow an exponential distribution with a mean of $25,267. Profitability is best described by a Gamma distribution with a mean of $4,824. Of the 305 claims analyzed for profitability, 61% were profitable. The results indicate substantial financial risk associated with claiming race horses, but conclude that there are positive economic returns on average.
Institution/Association: Journal of Agribusiness>Volume 17, Number 1, Spring 1999
Total Pages: 12
Language: English
From Page: 37
To Page: 48
Collections:Volume 17, Number 1, Spring 1999

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