Estimating the implied discount rate: An application to multi-year nfl trades of draft picks

Abstract

We estimate the implied discounted rate associated with trades of National Football League (NFL) draft picks that involve draft picks in different years. The NFL conducts an annual draft of draft-eligible college football players. NFL executives use draft charts to determine the value of each draft pick, and we use this draft chart to estimate the implied discount rate of trades combining current and future year draft picks. Using data from the full sample of 61 NFL trades of draft picks containing a combination of current and future year draft picks occurring from 2002 through 2016, we find that the implied discount rate ranges from $-$ 172.50% to 625.81%. We find that, for the 57 draft day trades, the implied discount rate is positively associated with the head coach’s tenure of the team giving away the future draft pick.

Keywords

National football league draft picks draft value implied discount rate Data Availability: Data available from sources identified in the paper.

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