The risk premium for equity: implications for resource allocation, welfare and policy

Simon Grant and John Quiggin

No WPR04_8, Risk & Uncertainty Working Papers from Risk and Sustainable Management Group, University of Queensland

Abstract: This paper describes experiences in the development and testing of three distinct financial models to support farm forestry decisions involving non-traditional tree species in northern Australia and in the Philippines. A variety of options were examined with respect to model design, yield prediction, computing platform, forestry performance criteria and other features. Two of the models focus on the forestry enterprise in isolation, while the third evaluates forestry within the context of the overall farm business. It is found that choice of model design depends on the particular type of application intended and availability of financial data for this application. Some complementarities were gained in replicating features when progressing from one model to the next. Model construction and testing were challenging tasks requiring considerable funds and for two of the models proceeding over a number of years. Validation involved the gradual gaining of confidence in a model as it progressed through various versions. For the more complex models, greater effort in development of the user interface was found to be warranted. The models have proved more suitable for use by extension agents than individual landholders. Even with major resource inputs into model development, a number of desirable additional features can be identified.

Keywords: equity premium puzzle; public investment (search for similar items in EconPapers)
JEL-codes: G12 H1 (search for similar items in EconPapers)
Date: 2004-08
New Economics Papers: this item is included in nep-agr, nep-fin, nep-fmk and nep-pbe
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: THE RISK PREMIUM FOR EQUITY: IMPLICATIONS FOR RESOURCE ALLOCATION, WELFARE AND POLICY* (2006)
Working Paper: The risk premium for equity: implications for resource allocation, welfare and policy (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:rsm:riskun:r04_8

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