Human Capital Valuation in Professional Sport

This paper is based on the premise that in professional sport, team earnings are driven by the performance of the individual athlete. It follows that the expected realizable value of each athlete must be accurately estimated in order to obtain a realistic estimation of team earnings. This paper undertakes such as assessment by measuring individual contribution to team revenue. For the superstar, revenue growth is modeled by a combination of an exponential growth model and a path based on a Brownian motion. The slow-growth performer’s revenue growth is represented by an exponential growth model and two Brownian motions to account for increasing and declining revenue growth. The injured player’s revenue growth is approximated by an early period of either superstar performance or slow-growth performance, followed by a Poisson distribution with discontinuities to account for periods of absence due to injury.