Using APT to Assess the Impact of Farm Policy on Agribusiness Stocks

Michael Gunderson and Charles Moss

No 9775, 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: This study investigates the impact of differing U. S. Farm Policy regimes on the stock prices of publicly traded agribusinesses. Following the Roll and Ross approach, we apply a two step Arbitrage Pricing Model (APM). We analyze the effect of agricultural policy on returns to agribusiness by applying a modified APM to agricultural returns to test for the presence of an agribusiness premium or discount. We further augment our analysis by dividing the sample into two time periods around the implementation of the 1996. The differences in agribusiness premium can then be tested using a paired t-test. The empirical evidence lends support to a switch from negative returns to agribusiness stocks pre-FAIR Act to positive returns to agribusiness stocks after its enactment.

Keywords: Agribusiness; Agricultural and Food Policy (search for similar items in EconPapers)
Pages: 12
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea07:9775

DOI: 10.22004/ag.econ.9775

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