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Determinants of the Price of Soccer Forwards

Tuvshin Orlokh 5/4/2012

Soccer players are transferred between clubs in the off season. There is a very wide range in the transfer price of individuals, from almost nothing to hundreds of millions of dollars. This paper investigates the determinants of the transfer price of soccer forwards transferring into, out of, or within the English Premier League. The method of analysis was OLS regressions. The determining factors of ones transfer price were total number of appearances and shots on goal in the previous season, and the wealth of the buying as well as selling team. The implications of this are that a forwards ability to strike the ball on target is perhaps more important than scoring goals. The wealth of the teams involved in the transfer of a player is the most important factor that is not concerning the traits of the individual being transferred.

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Introduction In the off season, soccer fans delight themselves in watching the player transfer market.

Teams may let go of a beloved member, or purchase someone who is desperately needed on their team. Most recently, the striker Fernando Torres was purchased by Chelsea FC from Liverpool FC for roughly 80 million USD. To provide another example, Peter Crouch and Papiss Ciss were both transferred within five months of each other, for the same price, despite the fact that Cisse had twice as many goals. There is a noteworthy wide range in the transfer prices of players. It could be in the thousands of dollars on one end, to the current record holder of the highest transfer price in history, Cristiano Ronaldo, who was transferred for almost $130 million (BBC Sport, 2009). That leads to the question, what is responsible for the differences in the transfer prices of attacking soccer players?


Literature Review There have been quite a few papers that have attempted to explain the transfer price of

soccer players. It appears player specialization has an impact on salary (price). Goalkeepers, being the most specialized individual since they cannot play anywhere else, have lower salaries. Midfielders, being the least specialized, receive significant premiums (Frick, 2007). However, the focus of this paper is strictly forwards, including attacking midfielders, but not central midfielders. Figure 1 shows all the possible positions on the field. The five highest-up players are the focus of this paper.

Orlokh 3 Bernd Frick (2006) found a positive correlation between age, career games, international caps and the log of annual salary as the dependent variable. Lehmann and Schulze (2005) surprisingly found that the number of Google hits a player received was positively correlated the price of an individual, suggesting that there is a star power effect with players and salaries. However, it is difficult to extrapolate whether the players price was higher because of his star power, or if his star power is higher because he is simply a better player, and thus received a higher salary. Many researchers1 have found that players of either European origin (Western and Eastern) have had positive correlations with transfer price, holding all else constant, suggesting that there may be cases of positive racism in the market.


Theory As economists, we know that price is determined by the supply and demand model,

where the two curves intersect. This paper treats one individual soccer player as a vertical supply curve, because there is only one of him. Therefore, the true determinant lies in the demand side. This paper also treats players as substitutes for one another. As such, whether the player would be considered an inferior product or a superior product depends on his skill level of the two being compared. The better player would be the superior product, and hence have a higher price in theory. We know that demand is a function of the price of the good (player), price of related goods (other players), income, preferences, and expectations. This is shown below graphically:

Feess, Frick and Muehlheusser (2004); Huebl and Swieter (2002); Lehmann (2000); Lehmann and Weigand

(1999). All these previous research papers were cited by Bernd Frick in his 2007 paper The Football Players Labor Market: Empirical Evidence From the Major European Leagues.

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Transfer price

P1* Dteam

The supply line is fixed, because there is only one of the player being transferred; each player is a unique supplier in the market, and there is no other like him (no
Supply (fixed)

two identical goods).


Empirical Model The data set contains 58 observations. One player is one observation. The observations

are limited players transferring into, out of, or within the English Premier League, to keep prices uniform. Also, there is quite a language barrier in browsing Spanish, Italian, and German data. The data were consolidated with player statistics acquired from BBC Sport, ESPN SoccerNet,, and official FIFA star ratings of clubs. The financial balance sheets of clubs are not public, so the star ratings are proxy variables for club wealth. Clubs are rated out of 5. A 5star club is the highest class, and teams are categorized by every half-star. A 4.5-star club is slightly less wealthy, and less talented than a 5-star club. A 4-star club is slightly less wealthy and less talented than a 4.5-star club. The method of testing will be OLS regressions at the 95% confidence level. The regression consists of one dependent variable, the transfer price of a player, and what were

Orlokh 5 initially 15 independent variables2 has been reduced to four. The most interesting variable to be cut loose is goals. The models suggested that shots on goal is a more significant variable than goals itself. The variables in the final model are: appearances (App), club rating of selling team (Sell), and club rating of buying team (Buy), and shots on goal (SG). Thus, the formula for the regression would be written: P = 1 + 2(APP) + 3(SEL) + 4(BUY) + 5(SG) +

Table 1: Definitions of Variables Variable Price Appearances Club rating of seller Club rating of buyer Shots on goal Short form P APP SEL BUY SG Type Dependent Independent Independent Independent Independent Definition Transfer price of the player Number of total appearances for club and country by player in previous season FIFA club rating out of five stars FIFA club rating out of five stars Number of shots on target previous season Expected sign N/A (+) (+) (+) (+)

Appearances should have a positive relationship with transfer price. More appearances usually mean a player has had more time on the pitch. He sees more play time, because he is probably a better player than someone who sees less play time.

Began testing with the variables height, weight, age, appearances, yellow cards, red cards, assists, shots, shots on goal, fouls committed, fouls suffered, star-rating of selling team, and star-rating of buying team. Included two dummy variables for Attacking Midfielder and whether the player is on the national teams roster. Due to multicollinearity, shots were removed in favor of shots on goal. Red cards and yellow cards were removed in favor of fouls committed. On top of this, red cards are so few and far in between that the numbers were generally 0 or 1, at most 2 this skewed the testing of red card data severely. Fouls suffered and fouls committed was entirely insignificant, as were the two dummy variables.

Orlokh 6 The club ratings of the buying and selling teams are proxy variables for the wealth of a club. Wealth and income are major components of an entitys demand curve and function. V. Results To reiterate an earlier point, what was most surprising is that the variable shots on goal (SG) was more significant than goals. This suggests that perhaps effort is more appreciated by managers than the hard statistic of goals scored. Below are regression results of three different models. Coefficients are in millions of British Pounds. All three models contain the variables APP, SEL, and BUY. However, only the first model has goals as a fourth variable. The second model has shots on goals as a fourth variable. The third model has both goals and shots on goal as independent variables along with the three stated previously.
Table 1: OLS Regression

Constant APP SEL BUY G SG Adjusted R2

Model A APP, SEL, BUY, Goals (G) -56.155 (-6.179) 0.004 (0.039) 4.148 (2.628) 10.328 (5.599) 0.684 (4.379) 0.604

Model B [Final] APP, SEL, BUY, Shots on goal (SG) -43.051 (-5.530) -0.203 (-2.144) 3.358 (2.576) 8.502 (5.478) 0.428 (7.258) 0.734

Model C APP, SEL, BUY, G, SG -44.414 (-5.703) -0.226 (-2.366) 3.534 (2.719) 8.682 (5.617) 0.214 (1.36) 0.371 (5.181) 0.734

Numbers in parentheses indicate (t-stats) All regressions are at the 95% confidence level

Orlokh 7 After running OLS regressions, four variables turned out significant. The club rating of the selling and buying team is always significant. This makes sense, because income is a major determinant of demand. A higher club rating usually implies that club has a greater wealth. This translates to a higher demand curve, increasing the equilibrium price of the player they are buying. Although the FIFA star rating of clubs is not a perfect proxy for the wealth of a club, it is significant in the model in helping explain the independent variable. The number of assists a forward had the previous was also insignificant to his transfer price. This was also a surprise, but is not very shocking to discover. This is telling us that in the end, a forwards only true purpose on the field is to strike the ball at the goal. What is most peculiar is that the variable appearances seems to be almost entirely insignificant in Model A, while it is significant in both other models. I have not come to any reasonable conclusions as to why this may be. It requires further investigation that is outside of the scope of this paper. In Model C, when the variables shots and shots on goal are contained in the same regression, goals are suddenly a lot less significant. Running a correlation matrix revealed that the two variables had a correlation of 0.75. Keeping goals as an independent variable would not add any further explanatory power to the model. One thing about the results that was quite unexpected was the fact that appearances actually had a negative sign. I had expected that its sign would be positive, because more appearances should mean more experience, enriching the player and making him better, causing his price to be higher. However, this was not true according to the model. One possible explanation for this could be that players who have the relatively high number of appearances may be players who are at the peak of their career. So, the negative sign could be an acknowledgement of the fact that purchasing a player in his prime could mean that the player

Orlokh 8 may exhibit a weaker performance in the future. Soccer players typically do not play into their mid-30s. Most soccer players in their prime are in their 20s. All in all, the final regression is able to explain around 73% of the variation in the dependent variable.


Conclusions This research was aimed at discovering the determinants of a players transfer price. A

number of expected as well as unexpected results were quite telling. For example, including the dummy variables for attacking midfielders and national team players turned out insignificant in the data set. I had thought that appearances should yield a positive correlation with a players transfer price, and this too was also shown to be false. What was most telling in the end was that shots on goal is more significant in determining the transfer price of a player than actual goals. This means managers prefer a hard worker. Of course having goals is good too, but you can be a great goal-scorer against unskilled goalkeepers. What matters for the player is that they hit the ball on target. The actual data set was not as wholesome as I would have liked to it to be. This is because although hundreds of players are transferred in the off season, the details of only a minority of transfers are publicly released. This is because players, their agents, or club managers may choose to withhold information regarding a players salary. If more details of player transferred were made public, then perhaps a larger data set could yield a higher adjusted R-square. Further research could include an inquiry into second-tier divisions of soccer, to see if the determinants of transfer prices are universal in the game. This paper focused on the English

Orlokh 9 Premier League. It would be interesting to see if the results would be similar in the Second Division of English soccer, Second Division of Spanish soccer, or Minor League Soccer in the U.S.

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Figure 1 - Soccer Positions

Acronym guide: GK SW LB CB RB LWB RWB DM LM CM RM AM LW SS RW CF Goalkeeper Sweeper Left back Center back Right back Left wing back Right wing back Defensive midfield Left midfield Center midfield Right Midfield Attacking midfield Left wing Secondary striker Right wing Center forward

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VIII. References

Orlokh 12 1. "BBC Sport - Football." BBC Sport. British Broadcasting Company. Web. 01 May 2012. <>. 2. Dobson, Stephen, and John Goddard. The Economics of Football. Cambridge [u.a.]: Cambridge Univ., 2011. Print. 3. "ESPN Soccernet." Entertainment and Sports Programming Network. Web. 01 May 2012. <>. 4. Frick, Bernd. "The Football Players' Labor Market: Empirical Evidence From The Major European Leagues." Scottish Journal of Political Economy 54.3 (2007): 422-46. Print. 5. "SoccerBase - Players." SoccerBase. Racing Post. Web. 01 May 2012. <>. 6. Sky Sports News." SkySports. British Sky Broadcasting. Web. 01 May 2012. <>.