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The Pricing Performance Of Market Advisory Services In Corn And Soybeans Over 1995-2000

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Author Info

  • Good, Darrel L.
  • Martines-Filho, Joao
  • Irwin, Scott H.

Abstract

The purpose of this research report is to evaluate the pricing performance of market advisory services for the 1995-2000 corn and soybean crops. Certain explicit assumptions are made to produce a consistent and comparable set of results across the different advisory programs. These assumptions are intended to accurately depict "real-world" marketing conditions. Several key assumptions are: i) with a few exceptions, the marketing window for a crop year runs from September before harvest through August after harvest, ii) cash prices and yields refer to a central Illinois farm, iii) storage is assumed to occur at on-farm or commercial sites, and iv) marketing loan recommendations made by advisory programs are followed wherever feasible. Based on these assumptions, the net price received by a subscriber to market advisory programs is calculated for the 1995-2000 corn and soybean crops. Market and farmer benchmarks are developed for the performance evaluations. Two market benchmarks are specified in order to test the fragility of performance results to changing benchmark assumptions. The 24-month market benchmark averages market prices for the entire 24-month marketing window. The 20-month market benchmark is computed in a similar fashion, except the first four months of the marketing window are omitted. The farmer benchmark is based upon the USDA average price received series for corn and soybeans in Illinois. The same assumptions applied to advisory program track records are used when computing the market and farmer benchmarks. Four basic indicators of performance are applied to advisory program prices and revenues over 1995-2000. The results provide limited evidence that advisory programs as a group outperform market benchmarks, particularly after considering risk. In contrast, substantial evidence exists that advisory programs as a group outperform the farmer benchmarks, even after taking risk into account. Whether the superior performance of advisory programs versus the farmer benchmark is attributed to luck or skill depends on one's theoretical perspective. Efficient market theory favors a luck interpretation, while behavioral market theory favors a skill interpretation. Regardless of the theoretical perspective, there is little evidence that advisory programs with superior performance can be usefully selected based on past performance.

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Bibliographic Info

Paper provided by University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics in its series AgMAS Project Research Reports with number 14784.

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Date of creation: 2002
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Handle: RePEc:ags:uiucrr:14784

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Web page: http://www.ace.uiuc.edu/
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Keywords: Marketing;

References

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  1. Martines-Filho, Joao & Irwin, Scott H. & Good, Darrel L. & Cabrini, Silvina M. & Stark, Brian G. & Shi, Wei & Webber, Rick L. & Hagedorn, Lewis A. & Williams, Steven L., 2003. "Advisory Service Marketing Profiles For Corn Over 1995-2000," AgMAS Project Research Reports 14776, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  2. Jennifer Carpenter & Anthony Lynch, 1998. "Survivorship Bias and Attrition Effects in Measures of Performance Persistence," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-077, New York University, Leonard N. Stern School of Business-.
  3. Judith Chevalier & Glenn Ellison, 1996. "Are Some Mutual Funds Managers Better Than Others? Cross-Sectional Patterns in Behavior and Performance," NBER Working Papers 5852, National Bureau of Economic Research, Inc.
  4. Martines-Filho, Joao & Good, Darrel L. & Irwin, Scott H., 2000. "1999 Pricing Performance Of Market Advisory Services For Corn And Soybeans," AgMAS Project Research Reports 14779, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  5. Hirshleifer, David, 2001. "Investor Psychology and Asset Pricing," MPRA Paper 5300, University Library of Munich, Germany.
  6. Brown, Stephen J, et al, 1992. "Survivorship Bias in Performance Studies," Review of Financial Studies, Society for Financial Studies, vol. 5(4), pages 553-80.
  7. Lakonishok, Joseph & Shleifer, Andrei & Vishny, Robert W., 1992. "The Structure and Performance of the Money Management Industry," Scholarly Articles 10498059, Harvard University Department of Economics.
  8. Jirik, Mark A. & Irwin, Scott H. & Good, Darrel L. & Jackson, Thomas E. & Jirik, Mark A. & Martines-Filho, Joao, 2000. "The 1995 Through 1998 Pricing Performance Of Market Advisory Services For Wheat," AgMAS Project Research Reports 14777, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  9. Schroeder, Ted C. & Parcell, Joseph L. & Kastens, Terry L. & Dhuyvetter, Kevin C., 1998. "Perceptions Of Marketing Strategies: Producers Versus Extension Economists," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), July.
  10. Martines-Filho, Joao & Irwin, Scott H. & Good, Darrel L. & Cabrini, Silvina M. & Stark, Brian G. & Shi, Wei & Webber, Rick L. & Hagedorn, Lewis A. & Williams, Steven L., 2003. "Advisory Service Marketing Profiles For Soybeans Over 1995-2000," AgMAS Project Research Reports 14791, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  11. Carl R. Zulauf & Scott H. Irwin, 1997. "Market Efficiency and Marketing to Enhance Income of Crop Producers," Finance 9711004, EconWPA.
  12. Lence, Sergio H. & Hayenga, Marvin L., 2001. "On the Pitfalls of Multi-Year Rollover Hedges: The Case of Hedge-To-Arrive Contracts," Staff General Research Papers 1965, Iowa State University, Department of Economics.
  13. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
  14. Jackson, Thomas E. & Irwin, Scott H. & Good, Darrel L., 1998. "1996 Pricing Performance Of Market Advisory Services For Corn And Soybeans," AgMAS Project Research Reports 14787, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  15. Pennings, Joost M.E. & Good, Darrel L. & Irwin, Scott H. & Gomez, Jennifer K., 2001. "The Role Of Market Advisory Services In Crop Marketing And Risk Management: A Preliminary Report Of Survey Results," AgMAS Project Research Reports 14772, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  16. Garcia, Philip & Adam, Brian D. & Hauser, Robert J., 1994. "The Use Of Mean-Variance For Commodity Futures And Options Hedging Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(01), July.
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Cited by:
  1. Irwin, Scott H. & Martines-Filho, Joao & Good, Darrel L., 2003. "The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2001," AgMAS Project Research Reports 37510, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  2. Pennings, Joost M.E. & Isengildina, Olga & Irwin, Scott H. & Good, Darrel L., 2004. "The Impact of Market Advisory Service Recommendations on Producers' Marketing Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(02), August.
  3. Kidd, Willis V. & Brorsen, B. Wade, 2002. "Can Structural Change Explain Changes In Returns To Technical Analysis?," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19066, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  4. Cabrini, Silvina M. & Stark, Brian G. & Irwin, Scott H. & Good, Darrel L. & Martines-Filho, Joao, 2004. "Portfolios Of Agricultural Market Advisory Services: How Much Diversification Is Enough?," 2004 Conference, April 19-20, 2004, St. Louis, Missouri 19013, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  5. Irwin, Scott H. & Martines-Filho, Joao & Good, Darrel L., 2003. "The Performance Of Agricultural Market Advisory Services In Corn And Soybeans," 2003 Annual meeting, July 27-30, Montreal, Canada 22256, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Pennings, Joost M.E. & Isengildina, Olga & Irwin, Scott H. & Good, Darrel L., 2004. "The Impact Of Marketing Advisory Service Recommendations On Producers' Marketing Decisions," 2004 Annual meeting, August 1-4, Denver, CO 20389, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Kidd, Willis V. & Brorsen, B. Wade, 2002. "Can Structural Change Explain The Decrease In Returns To Technical Analysis?," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19059, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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