Tuesday, June 10, 2008

Auction Buyer Effectiveness

To the best of my knowledge, nobody has ever tried to measure the effectiveness of buyers at thoroughbred auctions and to compare the success of different buyers. Until now, that is. I'll be writing about some of my thoughts on how best to measure this over the next few weeks. I also plan to study whether buyer success is consistent over extended time periods. I'll start by introducing a very crude measure of buyer success. I'll call it 'Auction Buyer Effectiveness' (ABE). To calculate a buyer's ABE, simply add up the total earnings of the horses purchased, and divide by the total amount spent. As I said, this is a VERY crude measure, and it remains to be seen whether it provides any really valuable information. I believe we can come up with some better measures that address some of ABE's shortcomings, but for now will simply list a few of the problems with ABE:

1. Ignores variability in total expenses caused by different lengths of career.
2. Ignores impact of expenses of buying younger horses vs. older horses.
3. Like any measure based on earnings, may be skewed by state bred races.
4. Like any measure that uses a total or mean (rather than median) may be skewed by a single outstanding success.
5. Likely to be systematically higher for lower priced horses than higher priced horses.

If I have time, I'd like to take a look at whether even a crude measure like ABE shows correlation from one year to another within various price tiers.

1 comment:

Winston said...

I'm not sure how much effort it would take but you could adjust it to the mean by taking the total spent at all auctions by all buyers and dividing it by all horses to come up with your standard, i.e. 1.00.

Then you have a relative index to compare to when you get each buyers number. Along the lines of the AEI.

This sounds fascinating and I will keep reading to see how it goes.