Evaluation of the efficiency of European Union farms: a risk-adjusted return approach

Vilija Alekneviciene, Birute Stareviciute and Egle Alekneviciute
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Vilija Alekneviciene: Institute of Economics, Accounting and Finance, Aleksandras Stulginskis University, Kaunas, Lithuania
Birute Stareviciute: Institute of Economics, Accounting and Finance, Aleksandras Stulginskis University, Kaunas, Lithuania
Egle Alekneviciute: Department of Finance, Vytautas Magnus University, Kaunas, Lithuania

Agricultural Economics, 2018, vol. 64, issue 6, 241-255

Abstract: The aim of this study was to assess the efficiency of EU member-state farms using a risk-adjusted return approach and to determine the impact of subsidies on the efficiency of EU farms. Farm efficiency was analysed by the member-state and by the type of farming and was based on the calculation of Sharpe and Treynor ratios. Systemic risk was expressed by standard deviation in order to estimate the share of systemic risk in the total risk. The change in Sharpe ratios was assessed to determine the impact of subsidies on EU farm efficiency. The results of the risk-adjusted return analysis reveal that farms in the EU-15 were more efficient than farms in the EU-12 in 2004-2013, possibly due to being more experienced in risk management. Nevertheless, the EU-15 did not undertake a bigger share of systemic risk when compared to the EU-12 farms. The impact of financial support on the efficiency of the EU-12 farms was also not stronger when compared to the EU-15 farms.

Keywords: excess return; farm efficiency; Sharpe ratio; systemic risk; total risk; Treynor ratio (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:caa:jnlage:v:64:y:2018:i:6:id:272-2016-agricecon

DOI: 10.17221/272/2016-AGRICECON

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