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Roses or Lemons: Adverse Selection in the Market for Thoroughbred Yearlings

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  • Brian Chezum
  • Brad Wimmer

Abstract

This paper tests for the presence of adverse selection in thoroughbred yearling auction markets. Thoroughbred auctions consist of two seller types: sellers who breed horses to race and sell (racers) and sellers who take all their yearlings to auction (breeders). If racers use private information, keeping those yearlings with a higher probability of on-track success, they are likely to receive a lower price for similar yearlings as compared to breeders. Using data from Keeneland's 1994 September yearling sale, we find support for this hypothesis. We improve on previous studies by analyzing the distinction between seller types on a continuous scale. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Brian Chezum & Brad Wimmer, 2000. "Roses or Lemons: Adverse Selection in the Market for Thoroughbred Yearlings," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 521-526, August.
    • Handle: RePEc:tpr:restat:v:79:y:2000:i:3:p:521-526
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/rest.1997.79.3.521
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    Cited by:

    1. Glenn Boyle & Gerald Ward, 2018. "Do Better Informed Investors Always Do Better? A Buyback Puzzle," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 2137-2157, October.
    2. Conor Parsons & Ian Smith, 2008. "The Price of Thoroughbred Yearlings in Britain," Journal of Sports Economics, , vol. 9(1), pages 43-66, February.
    3. Frank A. Gamrat & Raymond D. Sauer, 2000. "The Utility of Sport and Returns to Ownership," Journal of Sports Economics, , vol. 1(3), pages 219-235, August.
    4. Emily J. Plant & C. Jill Stowe, 2019. "Is Moneyball Relevant on the Racetrack? A New Approach to Evaluating Future Racehorses," Journal of Sports Economics, , vol. 20(3), pages 428-447, April.
    5. Brian Chezum & Bradley S. Wimmer, 2000. "Evidence of Adverse Selection from Thoroughbred Wagering," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 700-714, January.

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