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Does Market Timing Contribute to the Cattle Cycle?

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  • Stephen F. Hamilton
  • Terry L. Kastens

Abstract

Recent evidence suggests that cyclical cattle inventories are driven by exogenous shocks. This article examines a second possible contributing factor to the cattle cycle: a market timing effect that arises from individual attempts to maintain countercyclical inventories. The model uncovers an important conceptual point: to the extent that cycles are driven by exogenous shocks, a representative producer should outperform one who maintains a constant inventory; whereas, for cycles induced by market timing, a representative producer should underperform one with a constant inventory. Simulated net returns over 1974−98 reveal that a constant-inventory manager significantly outperformed the representative U.S. producer, which indicates that market timing influences the cattle cycle. Copyright 2000, Oxford University Press.

Suggested Citation

  • Stephen F. Hamilton & Terry L. Kastens, 2000. "Does Market Timing Contribute to the Cattle Cycle?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 82-96.
  • Handle: RePEc:oup:ajagec:v:82:y:2000:i:1:p:82-96
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    File URL: http://hdl.handle.net/10.1111/0002-9092.00008
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    Cited by:

    1. Joe L. Parcell & Jason R.V. Franken & Maria Cox & David J. Patterson & Richard F. Randle, 2010. "Buyers' perceptions of importance and willingness-to-pay for certain attributes of source and production verified bred heifers," Agricultural Economics, International Association of Agricultural Economists, vol. 41(5), pages 463-470, September.
    2. Kobayashi, Mimako & Harris, Thomas R. & Rollins, Kimberly S., 2009. "Invasive Weeds, Wildfire, and Rancher Decision Making in the Great Basin," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49365, Agricultural and Applied Economics Association.
    3. Edgar E. Twine & James Rude & Jim Unterschultz, 2016. "Canadian Cattle Cycles and Market Shocks," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(1), pages 119-146, March.
    4. Fanning, Jasper & Marsh, Thomas L. & Jones, Rodney D., 2001. "Commercial Beef Herd Replacement Strategies," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36064, Western Agricultural Economics Association.
    5. Aadland, David, 2004. "Cattle cycles, heterogeneous expectations and the age distribution of capital," Journal of Economic Dynamics and Control, Elsevier, vol. 28(10), pages 1977-2002, September.
    6. Stockton, Matthew C. & Van Tassell, Larry W., 2007. "The Cattle Price Cycle: An Exploration in Simulation," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37564, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    7. Dorfman, Jeffrey H. & Park, Myung D., 2009. "Looking for Cattle and Hog Cycles through a Bayesian Window," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49278, Agricultural and Applied Economics Association.

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