Forecasting Yearling Prices: A Comparison Of Alternative Time Series Models

Abstract

The thoroughbred breeding industry in North America has fallen on hard times. The health of this industry is often gauged by prices obtained for yearlings at North American auctions, particularly the average prices of summer sales at Keeneland and Saratoga. We examine various exponential smoothing algorithms along with a market-based structural model, as well as an ARIMA model in generating one-step ahead forecasts. The market-based structural model outperforms the other approaches with respect to both in- and out-of-sample forecasting accuracy.