Impact of Biofuels Policy on Agribusiness Stock Prices, The
AbstractCorn markets are important for many industries, including the seed, fertilizer, meat production/processing and agricultural machinery sectors, all of which are highly concentrated. Oligopoly theory suggests that corn input and field equipment suppliers likely benefit from policies that support corn markets, such as U.S. biofuels policy, while meat companies are likely adversely affected. Employing a linear two-factor (S&P 500 and corn prices) equilibrium asset pricing model, this study investigates the impact of biofuels policy on U.S. agribusiness and food processing firm stock prices. Conditional heteroskedasticity in stock returns is accounted for using a GARCH(1,1) model. Corn price increases are found to have positive effects on excess stock returns for seed, fertilizer and machinery companies, while the impact on meat companies is negative. The results may be interpreted as evidence that crop input suppliers gain from U.S. biofuels policy while meat processors lose.
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Bibliographic InfoPaper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 09-wp497.
Date of creation: Sep 2009
Date of revision:
biofuels policy; excess stock returns; GARCH effect; linear factor model.;
Other versions of this item:
- Fatma Sine Tepe & Xiaodong Du & David A. Hennessy, 2009. "Impact of Biofuels Policy on Agribusiness Stock Prices, The," Midwest Agribusiness Trade Research and Information Center (MATRIC) Publications 09-wp497, Midwest Agribusiness Trade Research and Information Center (MATRIC) at Iowa State University.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
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- Khalfaoui Rabeh, K & Boutahar Mohamed, B, 2011. "A time-scale analysis of systematic risk: wavelet-based approach," MPRA Paper 31938, University Library of Munich, Germany.
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