An Operational Approach for Evaluating Investment Risk: An Application to the No-Till Transition
AbstractAn Operational Approach for Evaluating Investment Risk: An Application to the No-Till Transition 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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Bibliographic InfoPaper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2005-1.
Length: 23 pages
Date of creation: Jan 2005
Date of revision:
repeated auction; Investment risk; Monte Carlo simulation; no-till; rent-purchase; risk; safety-first; technology adoption; transition strategy;
Find related papers by JEL classification:
- J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
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