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Rational Expectations in Agriculture? A Review of the Issues and the Evidence

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  • Scott H. Irwin
  • Cameron S. Thraen

Abstract

A rapidly-growing literature on rational expectation modeling and testing is found in agricultural economics. The reviewed studies do not offer a consensus regarding the verification or falsification of the rational expectation hypothesis in agricultural markets. Small sample sizes and the low power of statistical tests in the presence of alternative expectation hypotheses contribute to the variability in conclusions. An additional and confounding source of the variability is specification searching. With a wide variability in specifications, divergent results are to be expected. Despite the lack of consensus, rational expectations modeling and testing has improved our knowledge of both expectation formation in agricultural markets, and the processes of agricultural market equilibrium and price determination.

Suggested Citation

  • Scott H. Irwin & Cameron S. Thraen, 1994. "Rational Expectations in Agriculture? A Review of the Issues and the Evidence," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 16(1), pages 133-158.
    • Handle: RePEc:oup:revage:v:16:y:1994:i:1:p:133-158.
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    File URL: http://hdl.handle.net/10.2307/1349528
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    Citations

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    Cited by:

    1. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    2. Fiechter, Chad & Kuethe, Todd & Zhang, Wendong, 2023. "Information Rigidities and Farmland Value Expectations," ISU General Staff Papers 202306131414240000, Iowa State University, Department of Economics.
    3. Nauges, Celine & Wheeler, Sarah Ann & Zuo, Alec, 2016. "Elicitation of irrigators’ risk preferences from observed behaviour," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(3), July.
    4. Brorsen, B. Wade & Irwin, Scott H., 1996. "Improving the Relevance of Research on Price Forecasting and Marketing Strategies," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(1), pages 68-75, April.
    5. Frechette, Darren L., 1999. "The Supply Of Storage Under Heterogeneous Expectations," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(3), pages 1-14, December.
    6. Joni M. Klumpp & B. Wade Brorsen & Kim B. Anderson, 2008. "Market Advisory Service Recommendations and Wheat Producers' Selling Decisions," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(1), pages 117-128, March.
    7. Neibergs, J. Shannon & Thalheimer, Richard, 1997. "Price Expectations And Supply Response In The Thoroughbred Yearling Market," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 29(2), pages 1-17, December.
    8. Anderson, John D. & Ward, Clement E. & Koontz, Stephen R. & Peel, Derrell S. & Trapp, James N., 1997. "Public Information Impacts on Price Discovery and Marketing Efficiency in the Fed Cattle Market," Staff Papers 232523, Virginia Polytechnic Institute and State University, Department of Agricultural and Applied Economics.
    9. Fiechter, Chad M. & Kuethe, Todd H. & Zhang, Wendong, 2022. "Information Rigidities in Farmland Value Expectations," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322070, Agricultural and Applied Economics Association.
    10. Parise, Gerald F., 1994. "Permanent income hypothesis and the cost of adjustment," ISU General Staff Papers 1994010108000012303, Iowa State University, Department of Economics.
    11. Chaudhry, Muhammad Imran & Katchova, Ani & Miranda, Mario Javier, 2016. "Examining pricing mechanics in the poultry value chain - empirical evidence from Pakistan," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235953, Agricultural and Applied Economics Association.
    12. Tóth, József & Nemes, Anna, 2014. "Market-type and government supported risk management in the Hungarian agriculture," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182854, European Association of Agricultural Economists.
    13. Berg, Ernst, 2017. "Impacts of Inventory Management on Price Volatility in Agricultural Commodity Markets: Insights from a System Dynamics Model," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261281, European Association of Agricultural Economists.

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