Hedonic Pricing and Forecasting in the Market for Thoroughbred Yearlings

Abstract

Using data from one of Australia's largest thoroughbred auction houses, we investigate the price determinants of thoroughbred yearlings sold at auction. We include novel key variables to construct various hedonic pricing models, and test whether the models forecast sufficiently well out-of-sample to be a useful tool for buyers and sellers. We find that the price of a yearling is responsive to the sire's stud fee and the average price of the yearling's siblings. Out-of-sample forecasting suggests that our model provides significant improvement over existing models.