MAXIMUM-LIKELIHOOD ESTIMATES OF RACEHORSE EARNINGS AND PROFITABILITY

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.


Subject(s):
Issue Date:
1999
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/14682
Published in:
Journal of Agribusiness, Volume 17, Number 1
Page range:
37-48
Total Pages:
12




 Record created 2017-04-01, last modified 2017-07-23

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