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Maximum-Likelihood Estimates Of Racehorse Earnings And Profitability

Author

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  • Vinzant, Patrick L.
  • Neibergs, J. Shannon

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.

Suggested Citation

  • Vinzant, Patrick L. & Neibergs, J. Shannon, 1999. "Maximum-Likelihood Estimates Of Racehorse Earnings And Profitability," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 17(1).
  • Handle: RePEc:ags:jloagb:14682
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    File URL: http://purl.umn.edu/14682
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    References listed on IDEAS

    as
    1. Neibergs, J. Shannon & Thalheimer, Richard, 1997. "Price Expectations And Supply Response In The Thoroughbred Yearling Market," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 29(02), December.
    2. Neibergs, J. Shannon & Thalheimer, Richard, 1997. "Price Expectations and Supply Response in the Thoroughbred Yearling Market," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 29(02), pages 419-435, December.
    3. John Freebairn & Bill Griffiths, 2006. "Introduction," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages 1-1, September.
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