Pricing football transfers : determinants, inflation, sustainability, and market impact : finance, economics, and machine learning approaches Moussa Ezzeddine To cite this version: Moussa Ezzeddine. Pricing football transfers : determinants, inflation, sustainability, and market impact : finance, economics, and machine learning approaches. Economics and Finance. Université Panthéon-Sorbonne - Paris I, 2020. English. NNT : 2020PA01E064. tel-03171642 HAL Id: tel-03171642 https://tel.archives-ouvertes.fr/tel-03171642 Submitted on 17 Mar 2021 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. Doctoral Dissertation PhD in Economics Moussa Ezzeddine 17th December 2020 Pricing Football Transfers: Determinants, Inflation, Sustainability, and Market Impact. Finance, Economics, & Machine Learning Approaches Thesis Director: Pierre-Charles Pradier Jury: • Luc Arrondel, directeur de recherches de CNRS, président, • Robert Simmons, professor at Lancaster University, rapporteur, • Nicolas Scelles, senior lecturer at Manchester Metropolitan University, rapporteur, • Emilio Garcia, directeur juridique de FIFA, suffragant, • Wladimir Andreff, président du conseil scientifique de l’observatoire de l’économie du sport, suffragant, • Pierre-Charles Pradier, MCF at UP1, directeur des recherches. i Declaration I declare that this thesis is my research carried out in France at the University of Paris 1 – Pantheon Sorbonne under the supervision of Professor Pierre-Charles Pradier of the same university. This thesis has not been shared or submitted in any other institution for any other award or degree. Cited References have been fully acknowledged in this research. Moussa Kazem Ezzeddine ii Abstract Each year new transfer market news tops headlines due to the astronomical prices paid to recruit a superstar by top football clubs. The money paid by the buying club is assumed to be an estimate of the market value of the transferred player. Thus, the challenge is to determine the significant factors that affect the pricing function of a football player. In this research, a large data set has been extracted containing more than 87,000 transfers and more than 200,000 wage observation alongside two sets of variables; one contains real statistics of each player from the previous two seasons, while the other contains synthetic scores given by experts. This work has made use of one hedonic pricing function and three machine learning algorithms to estimate the most important factors affecting the financial value of the player. Albeit imperfect, but the models can predict the pricing functions of the transfer fees and wages with different promising precisions. Finally, a market model has been carried out to determine the effect of transfers, surprising match results, and COVID-19 on the market value of a football club. The overall findings were promising as they have provided interesting explanations about the different segmentations in the transfer market and the effectivity of transfers on the fluctuations of the share values of certain clubs. iii Dedication I would like to thank my supervisor Professor Pierre-Charles Pradier for his outstanding contributions throughout the stages of the PhD research. I thank him for trusting my capabilities and for enrolling me for the PhD program at the Universite Paris 1 – Pantheon Sorbonne. His continuous support, time dedication, immense knowledge and valuable advices have kept me motivated, and I cannot appreciate his support enough neither I could imagine a better advisor. Besides my supervisor, I would like to thank my parents for the enormous support they provided. My mother’s prayers and my father’s physical and fiscal contributions have insured my full-time safe stay in France. Without their contributions I couldn’t have made it to this stage. In fact, no words can serve me to describe their unlimited support. Moreover, I’d like to thank my brother and two sisters for their spiritual support throughout the journey. I can’t forget to pay a tribute to the late lawyer Paul Kudjokoma for his unconditional and priceless support, alongside his colleague lawyer Kenneth Kodjorgie, during the most critical and challenging working incidents I faced between 2013 – 2015 in Ghana... An experience which has reshaped my career and probably contributed to the decision of moving forward towards higher education. To Professor Pradier, my family, lawyers, colleagues and friends, I dedicate this humble work. iv Acknowledgement My sincere thanks go to emeritus professor Wladimir Andreff for his great and continuous support, insightful thoughts, and his participation in my thesis committee for two consecutive years, covering long distances to be present. Equally, I would like to thank emeritus professor Francois Gardes for his great technical support, helpful comments, dedication, and participation in the thesis committee. I would like to thank the jury members for accepting to be part of the jury. To professors Luc Arrondel, Robert Simmons and Nicolas Scelles, I express my sincere gratitude for the added value triggered by their participation due to their outstanding academic records and achievements. Special appreciation to Dr. Emilio Garcia, chief legal officer at FIFA, for joining this jury since his presence creates a link between research and industry due to his wide knowledge and experience that is highly respected by the stakeholders of the industry. Overall, I feel proud to present my thesis before such a great competent jury… I would like to thank professor Mathilde Maurel for the advices she gave me during the admission period and her subsequent support... Besides her, I would like to thank professor Marc-Arthur Diaye who has always been a good friend and a mentor. My French language professor, Mdm. Laurance Rico, deserves praise for improving my French speaking skills. Moreover, I am thankful for the technical unlimited support I have received from Dr. Peter Martey Addo and Maxime Nicolas. Additionally. I can’t forget to thank all my fellow labmates especially Daniel Bastides, Davide Fortin, Mona Barake, Gaspard Tissandier, Yann Lecorps, Adham Jaber, Bin Wang, Zeineb Charif, Yasmine ElKhatib and Aref Arkadani… and other school friends like Lyes Zemouche for the good memories we have shared. Finally, I would like to thank the doctoral school of Economics, Centre d’Economie de la Sorbonne (CES), and the university of Paris 1 – Pantheon Sorbonne for providing me the opportunity to join a great academic institution giving me access to its research facilities and laboratories. v Table of Contents Jury: .......................................................................................................................................................... i Declaration .............................................................................................................................................. ii Abstract .................................................................................................................................................. iii Dedication .............................................................................................................................................. iv Acknowledgement .................................................................................................................................. v Table of Contents ................................................................................................................................. vi List of Figures ......................................................................................................................................... ix List of Tables ........................................................................................................................................... x CHAPTER ONE ......................................................................................................................................... 1 1 INTRODUCTION ............................................................................................................................... 1 1.1 Background ............................................................................................................................. 1 CHAPTER TWO ........................................................................................................................................ 9 2 LITERATURE REVIEW ....................................................................................................................... 9 2.1 Introduction ............................................................................................................................ 9 2.2 Determination of Football Transfer Fees ................................................................................ 9 2.2.1 Methodological questions .............................................................................................. 9 2.2.2 Valuation techniques and results.................................................................................