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An Operational Approach for Evaluating Investment Risk: An Application to the No-Till Transition

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  • Bharat M. Upadhyay
  • Douglas L. Young

    ()
    (School of Economic Sciences, Washington State University)

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    Abstract

    An 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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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/InvestRiskSESWorkPaper.pdf
    File Function: First version, 2005
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    Bibliographic Info

    Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2005-1.

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    Length: 23 pages
    Date of creation: Jan 2005
    Date of revision:
    Handle: RePEc:wsu:wpaper:young-2

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    Related research

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

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    1. repec:jaa:jagape:v:32:y:2000:i:2:p:299-315 is not listed on IDEAS
    2. 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.
    3. 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.
    4. Spence, Michael & Zeckhauser, Richard J, 1972. "The Effect of the Timing of Consumption Decisions and the Resolution of Lotteries on the Choice of Lotteries," Econometrica, Econometric Society, vol. 40(2), pages 401-03, March.
    5. 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.
    6. Richardson, James W. & Klose, Steven L. & Gray, Allan W., 2000. "An Applied Procedure For Estimating And Simulating Multivariate Empirical (Mve) Probability Distributions In Farm-Level Risk Assessment And Policy Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(02), August.
    7. Anderson, Kim B. & Mapp, Harry P., Jr., 1996. "Risk Management Programs In Extension," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(01), July.
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