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

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.


Issue Date:
2013-02
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/143198
Total Pages:
20
JEL Codes:
Q14; G12; G14
Note:
This is a working draft. Please do not cite.




 Record created 2017-04-01, last modified 2017-08-26

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