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

Author

Listed:
  • Bharat M. Upadhyay
  • Douglas L. Young

    (School of Economic Sciences, Washington State University)

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.

Suggested Citation

  • Bharat M. Upadhyay & Douglas L. Young, 2005. "An Operational Approach for Evaluating Investment Risk: An Application to the No-Till Transition," Working Papers 2005-1, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:young-2
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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/InvestRiskSESWorkPaper.pdf
    File Function: First version, 2005
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    References listed on IDEAS

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    Cited by:

    1. Wauters, Erwin & De Cock, Lieve & Wit, Jan de & Lauwers, Ludwig H., 2011. "The foregone risk premium: a communicative and practical method for the evaluation of risk-return profiles in agriculture," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115737, European Association of Agricultural Economists.

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    More about this item

    Keywords

    repeated auction; Investment risk; Monte Carlo simulation; no-till; rent-purchase; risk; safety-first; technology adoption; transition strategy;
    All these keywords.

    JEL classification:

    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets

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