Uncertainty and Value Premium: Evidence from the U.S. Agriculture Industry

Bruno R. Arthur and Ani Katchova

No 143198, 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida from Southern Agricultural Economics Association

Abstract: We test the efficiency of the financial market for the stocks of publicly traded firms related to the largely subsidized U.S. agriculture industry. We study how the anomalous value premium appears in the stocks of participating firms. Our study of the value and growth anomalies of these stocks utilizes the sorting and the beta-premium regressions methods. The firm level data are obtained from merging the Center for Research in Security Prices (CRSP) data from NYSE, Amex, NASDAQ exchanges with the financial statements data from the Compustat database of Standard & Poor’s. The results show that the beta of the lower deciles of the agriculture industry related firms are in the same volatility direction as the market but at a lesser degree. The "cash-flow-to-price trading" strategy in agriculture-related stocks appears to be profitable as a riskless hedge portfolio that longs high CF/P agriculture-related stocks and short low CF/P agriculture-related stocks generates, on average and all else equal, a positive and statistically significant abnormal return of 0.23% per year. Perhaps, these U.S. agriculture industry firms benefit some spill-over from farm Bills subsidies.

Keywords: Agricultural Finance; Financial Economics (search for similar items in EconPapers)
Pages: 20
Date: 2013-02
New Economics Papers: this item is included in nep-agr
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Persistent link: https://EconPapers.repec.org/RePEc:ags:saea13:143198

DOI: 10.22004/ag.econ.143198

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