Human Capital Equity Returns: Evidence from the National Football League

Abstract

Human capital comprises a substantial portion of global wealth, but equity claims to human capital are not publicly traded. I analyze ten transactions between April 2014 and July 2016 in which ten active players in the National Football League (NFL) sell equity claims to their future labor income. The proceeds from these equity contracts total more than $38 million and value the human capital of these athletes at more than $357 million. These transactions represent the largest, most transparent dealings in human capital equity contracts by private parties. I estimate the expected returns of these human capital initial public offerings (IPO) using NFL contract data and player performance statistics. The average expected return of these IPOs is 5.9% before expenses. Expected returns are larger for human capital equity investments in players from teams in smaller geographic markets.

Keywords: Human Capital, Financial Innovation, Sports Economics

JEL Classification: J24, G12, G23, D14, Z22