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Asset Pricing Theory and the Predictable Variation in Agricultural Asset Returns

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  • Bruce Bjornson

Abstract

This study focuses on the time-series predictability of agricultural returns and evaluates the ability of conditional asset pricing models to capture such predictability. The models all have time-varying conditional risk premia and constant betas, as opposed to the unconditional specifications in prior studies. Results indicate significant time-varying predictability in agricultural asset returns. An Arbitrage Pricing model with prespecified economic factors, including a market portfolio, shows some ability to explain the predictability. The greater flexibility and information in conditional asset pricing models make them more suitable than unconditional models for many problems in agricultural finance.

Suggested Citation

  • Bruce Bjornson, 1994. "Asset Pricing Theory and the Predictable Variation in Agricultural Asset Returns," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(3), pages 454-464.
    • Handle: RePEc:oup:ajagec:v:76:y:1994:i:3:p:454-464.
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    File URL: http://hdl.handle.net/10.2307/1243657
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    Cited by:

    1. Erickson, Kenneth W. & Mishra, Ashok K. & Moss, Charles B., 2001. "Rates Of Return In The Farm And Non-Farm Sectors: A Time Series Comparison," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36148, Western Agricultural Economics Association.
    2. Hanson, Steven D., 1999. "A Simple Framework For Determining The Fundamental Agricultural-Use Value Of Michigan Farmland," Staff Paper Series 11641, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    3. Noumir, Ashraf & Langemeier, Michael, 2022. "Risk and return of heterogenous farmland locations and qualities," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 25(4), September.
    4. Madden, B. J. & Malcolm, Bill, 1996. "Deciding on the Worth of Agricultural Land," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 64(02), pages 1-14, August.

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