Do producers exhibit disposition effect? Evidence from grain marketing
The disposition effect is one of the most common types of behavior documented in inancial markets, and reflects the notion that investors tend to hold losing positions too long and close winning positions too fast. This idea can also be applied to grain marketing. The disposition effect would be related to whether producers sell their grain more readily when prices are “high” and wait longer when prices are “low”. This question is relevant because this type of behavior can affect marketing performance. If grain is sold too early, producers can miss opportunities to sell at higher price later. If producers hold their grain too long, price can go down and they will end up selling at a lower prices. Examination of pricing strategies of 15,564 wheat producers between 2003/04 and 2008/09 shows evidence of disposition effect in their marketing decisions. They seem to be eager to sell when the price offered by marketing contracts is above their reference price, and wait longer to sell when the price offered by marketing contracts is below their reference price.
|Date of creation:||Jun 2012|
|Contact details of provider:|| Web page: http://servsas.fsaa.ulaval.ca/index.php?id=12482&L=1|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Philip Brown & Nick Chappel & Ray Da Silva Rosa & Terry Walter, 2006. "The Reach of the Disposition Effect: Large Sample Evidence Across Investor Classes-super-," International Review of Finance, International Review of Finance Ltd., vol. 6(1-2), pages 43-78.
- Locke, Peter R. & Mann, Steven C., 2005. "Professional trader discipline and trade disposition," Journal of Financial Economics, Elsevier, vol. 76(2), pages 401-444, May.
- Ravi Dhar & Ning Zhu, 2006. "Up Close and Personal: Investor Sophistication and the Disposition Effect," Management Science, INFORMS, vol. 52(5), pages 726-740, May.
- Shefrin, Hersh & Statman, Meir, 1985. " The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, American Finance Association, vol. 40(3), pages 777-790, July.
- Frino, Alex & Johnstone, David & Zheng, Hui, 2004. "The propensity for local traders in futures markets to ride losses: Evidence of irrational or rational behavior?," Journal of Banking & Finance, Elsevier, vol. 28(2), pages 353-372, February.
- Lewis A. Hagedorn & Scott H. Irwin & Darrel L. Good & Evelyn V. Colino, 2005. "Does the Performance of Illinois Corn and Soybean Farmers Lag the Market?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1271-1279.
- Humphrey, Steven J. & Verschoor, Arjan, 2004. "The probability weighting function: experimental evidence from Uganda, India and Ethiopia," Economics Letters, Elsevier, vol. 84(3), pages 419-425, September.
- Brorsen, B. Wade & Anderson, Kim B., 2001. "Implications of Behavioral Finance for Farmer Marketing Strategy Recommendation," 2001 Conference, April 23-24, 2001, St. Louis, Missouri 18952, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
- James S. Eales & Brian K. Engel & Robert J. Hauser & Sarahelen R. Thompson, 1990. "Grain Price Expectations of Illinois Farmers and Grain Merchandisers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 701-708.
- Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
- McNew, Kevin & Musser, Wesley N., 2002. "Farmer Forward Pricing Behavior: Evidence from Marketing Clubs," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 31(2), October.
- Manel Baucells & Martin Weber & Frank Welfens, 2011. "Reference-Point Formation and Updating," Management Science, INFORMS, vol. 57(3), pages 506-519, March.
- McNew, Kevin & Musser, Wesley N., 2002. "Farmer Forward Pricing Behavior: Evidence from Marketing Clubs," Agricultural and Resource Economics Review, Cambridge University Press, vol. 31(02), pages 200-210, October.
When requesting a correction, please mention this item's handle: RePEc:ags:spaawp:125279. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.