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Application and comparison of risk adjusted performance-indicators in the context of pig production

Author

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  • Morfeld, Ulf
  • Latacz-Lohmann, Uwe
  • Krieter, Joachim

Abstract

In the recent past, risk and risk management in agriculture has risen on the agenda of farm managers. Amongst other things, the increased interest is inter alia attributed to the Capital Requirements Directives in the ‘Basel II’ agreement. In this article, we apply indicators of risk-adjusted returns, well known in the valuation of equity funds, to the context of pig production. Using a large data set of pig farm performance data, we demonstrate that different indicators of risk-adjusted returns do not necessarily lead to different results in the valuation of farms. We recommend using the Treynor Ratio in practical application. Our empirical analysis did not reveal a significant relationship between returns and risk.

Suggested Citation

  • Morfeld, Ulf & Latacz-Lohmann, Uwe & Krieter, Joachim, 2014. "Application and comparison of risk adjusted performance-indicators in the context of pig production," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 3(2), pages 1-9, January.
    • Handle: RePEc:ags:ijameu:200236
    DOI: 10.22004/ag.econ.200236
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    References listed on IDEAS

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    1. Tiedemann, Torben & Breustedt, Gunnar & Latacz-Lohmann, Uwe, 2011. "Risikoberücksichtigung in der nicht parametrischen Effizienzanalyse: Auswirkungen auf die Effizienzbewertung von deutschen Schweinemastbetrieben," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 60(04), pages 1-15, November.
    2. Tiedemann, Torben & Breustedt, Gunnar & Latacz-Lohmann, Uwe, 2011. "Risikoberücksichtigung in der nicht parametrischen Effizienzanalyse: Auswirkungen auf die Effizienzbewertung von deutschen Schweinemastbetrieben," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 60(4).
    3. Lien, Gudbrand, 2003. "Assisting whole-farm decision-making through stochastic budgeting," Agricultural Systems, Elsevier, vol. 76(2), pages 399-413, May.
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    Keywords

    Farm Management; Risk and Uncertainty;

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