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The Performance Of Agricultural Market Advisory Services In Marketing Wheat

Listed author(s):
  • Jirik, Mark A.
  • Irwin, Scott H.
  • Good, Darrel L.
  • Jackson, Thomas E.
  • Martines-Filho, Joao Gomes

The purpose of this paper is to investigate the performance of agricultural market advisory services in marketing wheat. Two key performance questions are addressed: 1) Do market advisory services, on average, outperform an appropriate wheat market benchmark? and 2) Do market advisory services exhibit persistence in their wheat performance from year-to-year? Market advisory service recommendations for wheat are available from the AgMAS Project for the 1995, 1996, 1997 and 1998 marketing years. At least 20 advisory programs are included for each year. Tests of pricing performance relative to a market benchmark are based on the proportion of programs exceeding the benchmark price and the average percentage difference between the net price of advisory programs and the benchmark price. In statistical terms, the pricing performance test results are clear. Not only do market advisory programs in wheat consistently fail to "beat the market," their performance is significantly worse than the market. The level of under-performance is striking and consistent, with the proportion of programs above market benchmarks for the four-year period ranging from 0.34 to 0.38. Estimates of the four-year average return relative to market benchmarks range from -9.61 to -10.48 percent. Tests of predictability are based on the correlation of performance measures for overlapping and non-overlapping adjacent marketing years. In general, the predictability results provide little evidence that future advisory program pricing performance can be usefully predicted from past performance. On average, correlations are positive for overlapping years (e.g. 1995 vs. 1996). However, correlations tend to be negative for non-overlapping years (e.g. 1995 vs. 1997), which implies that producers selecting top-performing programs based on a given year, and expecting them to continue to be top-performing funds, would actually experience just the opposite result.

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Paper provided by NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management in its series 2000 Conference, April 17-18 2000, Chicago, Illinois with number 18928.

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Date of creation: 2000
Handle: RePEc:ags:ncrtci:18928
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  1. Lakonishok, Joseph & Shleifer, Andrei & Vishny, Robert W., 1992. "The Structure and Performance of the Money Management Industry," Scholarly Articles 10498059, Harvard University Department of Economics.
  2. Carl R. Zulauf & Scott H. Irwin, 1997. "Market Efficiency and Marketing to Enhance Income of Crop Producers," Finance 9711004, EconWPA.
  3. Andrew Metrick, 1999. "Performance Evaluation with Transactions Data: The Stock Selection of Investment Newsletters," Journal of Finance, American Finance Association, vol. 54(5), pages 1743-1775, October.
  4. Schroeder, Ted C. & Parcell, Joseph L. & Kastens, Terry L. & Dhuyvetter, Kevin C., 1998. "Perceptions Of Marketing Strategies: Producers Versus Extension Economists," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), July.
  5. Judith Chevalier & Glenn Ellison, 1999. "Are Some Mutual Fund Managers Better Than Others? Cross-Sectional Patterns in Behavior and Performance," Journal of Finance, American Finance Association, vol. 54(3), pages 875-899, 06.
  6. Ritter, Jay R, 1991. " The Long-run Performance of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(1), pages 3-27, March.
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