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An Operational Approach For Evaluating Investment Risk: An Application To The No-Till Transition

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Author Info

  • Bharat M. Upadhyay

    (Agriculture & Agri-Food Canada)

  • Douglas L. Young

    (Washington State University)

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    Abstract

    Roy’s safety-first rule is used to provide measures popular with farmers of short and long term business risk associated with various no-till transition strategies over an investment horizon. The short run rule provided more sensitivity to inter-year financial risk than other commonly used criteria. Results revealed that speed of adoption influenced the probability of successful transition more than did the sequence of drill acquisition methods. Higher equity and larger farms had a greater chance of transition success. Slow acreage expansion with a custom or rental drill reduces risk until a no-till yield penalty is eliminated.

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    File URL: http://128.118.178.162/eps/othr/papers/0412/0412002.pdf
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    Bibliographic Info

    Paper provided by EconWPA in its series Others with number 0412002.

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    Length: 22 pages
    Date of creation: 29 Dec 2004
    Date of revision:
    Handle: RePEc:wpa:wuwpot:0412002

    Note: Type of Document - pdf; pages: 22. 22 pages, PDF format
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    Web page: http://128.118.178.162

    Related research

    Keywords: Investment risk; Monte Carlo simulation; no-till; rent- purchase; risk; safety-first; technology adoption; transition strategy;

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    1. Debrah, Siegfried & Hall, Harry H., 1989. "Data aggregation and farm risk analysis," Agricultural Systems, Elsevier, vol. 31(3), pages 239-245.
    2. Held, Larry J. & Helmers, Glenn A., 1981. "Growth And Survival In Wheat Farming: The Impact Of Land Expansion And Borrowing Restraints," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 6(02), December.
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    5. 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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    8. Buschena, David E. & Zilberman, David, 1994. "What Do We Know About Decision Making Under Risk And Where Do We Go From Here?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(02), December.
    9. Just, Richard E., 2003. "Risk research in agricultural economics: opportunities and challenges for the next twenty-five years," Agricultural Systems, Elsevier, vol. 75(2-3), pages 123-159.
    10. Selley, Roger A. & Wilson, Paul N., 1997. "Risk Research And Public Outreach: A Tale Of Two Cultures?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(02), December.
    11. Kingwell, Ross S. & Pannell, David J. & Robinson, Stephen D., 1993. "Tactical responses to seasonal conditions in whole-farm planning in Western Australia," Agricultural Economics, Blackwell, vol. 8(3), pages 211-226, March.
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