Background (followed by “Papers”)
Losey has bought and sold Thoroughbred horses since 1972, when he and two fellow UK students claimed “Miss Bee” at Ellis Park. Miss Bee won at Latonia two races later and eventually produced stakes winner Pago Lady, herself a stakes producer. Since then Losey has bought and sold over one hundred fillies and mares, and they have produced such outstanding runners as GII winner Touching Beauty, 620K SW El Gran Papa, and the stallion Precise End. (Losey bought their dams for $10K and $16K and $10K respectively). His equine finance articles have appeared in the Thoroughbred Times, The Horse, The Journal of Finance, the Mid-Atlantic Thoroughbred, The Blood-Horse, horseracingbusiness.com, and as a columnist for Blood-Horse Dailey. Losey is an independent writer and consultant.
Papers and Posts
JClub 140 Rule Analysis Feb 28 This paper first analyzes the economics of the Jockey Club 140 mare limit proposal. In the addendum to the paper I analyze the genetics of the proposal, realizing that we deserve a careful analysis by geneticists. Unfortunately, the Jockey Club has not used its resources (It has controlling interest in the BloodHorse Magazine) to provide us with expert analysis of it’s own proposal.
Economic Aspects of Yearlings Paper This paper by Xu and Losey analyzes yearling pricing particularly as it relates to sex of the foal and to birthdates of foals. The premiums paid for colts are analyzed by market strata for the 2016 Keeneland September Sale and are also placed in historical context. Pricing effects of birthdates are analyzed. We found that foals born in the middle of the foaling season tended to sell better in September 2016. We discuss environmental effects and a managerial preference that could explain observed patterns. With regard to the effects of birthdates on pricing, we recommend that further research over multiple sales be undertaken to determine if our findings for the 2016 sale are anomalous.
Rosenbergmarestudy This paper prepared for Dan Rosenberg considers approaches for building a high quality broodmare band. Previous studies trying to explain what types of fillies turn into the best broodmares had not appropriately taken into account biases arising from failure to adequately adjust for two major factors: 1) the quality of stallions bred to mares and 2) mare pedigree quality. The production records of some mare categories do not reflect the conventional wisdom. Foals from stakes-winning mares and non-winners tend to be overpriced at sales, while foals from unraced mares and speedy claiming and allowance fillies tend to be underpriced relative to their ultimate racing results.
Pricing_Stallion_Seasons_DiscrimMonopoly&AI pdf This paper discusses why it is logical for stallion managers to charge different prices to different buyers (to use price discrimination based on buyer category attributes). Potential buyers aware of price discrimination tactics by stallion managers can take steps to at least partially ameliorate disadvantageous pricing tactics used by stallion owners. This paper also presents the basic economics of artificial insemination vs. live cover and suggests that mare owners would save money and the breed would be likely to improve if we moved from requiring live covers to using artificial insemination.
PsychicIncome-IndustryEffects pdf This paper explains what is almost surely the major reason why it is difficult to make money in breeding, racing, eventing, showing, and most horse performance endeavors. It also explains why a “buy and hold” strategy (which makes good sense in the stock market) has serious drawbacks in horse markets relative to a “trading” strategy that quickly resells horse purchases.
AuctionBasics2018 If you are interested in “best practices” in the business of buying and selling Thoroughbreds, this paper provides the basics (and more) of theory and practical knowledge. The characteristics of Thoroughbred auction markets are described and discussed, including the institutional framework and bidding strategies. The section on setting reserves goes well beyond the basics, discussing some of the nuances that cause even seasoned market participants to sometimes make mistakes.
CAL Paper Summary pdf This presents a short summary of a long research paper on horse auction markets. Losey and co-authors discuss pricing anomalies (prices tend to be lower both early in the sale day, on the first day of the sale, and after a dark day) and explain why there tend to be more buybacks early in most multi-day sales, and more “outs” later in these sales.
Handicapping Basics pdf This discussion about betting on racehorses is a short and relatively simple introduction that is suited primarily for newcomers to the art of handicapping. However, the discussion of exotic pool carryovers and “bridge jumpers” may be of use to the more advanced handicapper as well.
Robert Losey’s website articles on horse-related topics include the following:
A financial analysis of “Share the Upside” deals such as Spendthrift Farm’s programs: Read Now
On the economics of stallion management and artificial insemination: Read Now
A short write-up on Centre College’s course (now discontinued) on breeding/racing economics and finance: Read Now
Haffler on the Tyranny of the Status Quo — Thoughts on whether the industry should change Triple Crown race arrangements and also on the possibility of introducing artificial insemination.
The Economics of State Breeders Funds (See the series on state breeders funds in Losey’s Bloodhorse Daily columns.)
Adjusting AEI for the Quality of Mares (This is explained in a Bloodhorse Daily column)
In the Works
What is the Optimal Number of Broodmares to Own? (My wife says the answer is zero, but more realistically, that varies with assumptions and circumstances.)
Jockey Insurance Programs