Should Farmers Invest in Financial Assets as a Risk Management Strategy? Some Evidence from New Zealand

Off-farm investment as a risk management strategy is not widespread among New Zealand sheep and beef farmers. This study explores the potential for risk reduction by the diversification of farm asset portfolios to include financial investments such as industrial equities and government bonds of various types. Results show that the negative correlations between long-run rates of return on farm assets and financial investments could result in a significant reduction of risk if equities and bonds were included in farm investment portfolios. However, when combined with information about attitudes to risks, it does not seem likely that farmers would adopt such strategies purely in order to stabilise incomes. Deregulation of the New Zealand economy in the mid 1980's had little impact on farmers' optimal allocation of their assets.Agricultural Finance, Risk and Uncertainty,

Momentum returns, market states, and market dynamics: Are Islamic stocks different?

Recent studies suggest that momentum returns are conditioned by market states and market dynamics. We ask if Islamic stocks behave differently from Non-Islamic stocks. Using data from the Malaysian stock market from 1991 to 2015, we find no significant difference in Islamic versus Non-Islamic stocks either in their level of momentum returns or in the behaviour of momentum returns in response to market states and market dynamics, irrespective of whether we use time-series or cross-sectional momentum returns. Interestingly, we find that the behaviour of momentum returns in Malaysia is broadly consistent with that in the US market in that momentum returns are higher following UP markets compared with momentum returns following DOWN markets. We also find that momentum returns are larger when the market continues in same state than when it transitions to a different state, consistent with results in the US market and that the absence of momentum returns following DOWN market states is due to market dynamics. Our results suggest that investors in Islamic stocks can execute momentum strategies without loss of efficacy compared with Non-Islamic stocks

Momentum returns, market states and market dynamics: Is China different?

Recent studies suggest that momentum returns are conditioned by market states, but we find that China is different. First, we find that momentum returns in China exclusively follow DOWN markets contrary to the U.S. evidence. Second, the absence of momentum returns following UP markets in China cannot be explained by market dynamics, unlike in the U.S. Third, momentum returns in China are higher when the market continues in the same state than when it transitions to the other state as in the U.S. but this is true in China only following DOWN states

Investor sentiment dynamics, the cross-section of stock returns and the MAX effect

Recent evidence shows that investor sentiment is a contrarian predictor of stock returns with speculative stocks earning lower (higher) future returns than safe stocks following high (low) sentiment states. We extend this argument by conditioning expected stock returns on sentiment dynamics and show that the mispricing of speculative and safe stocks worsens with sentiment continuations but is corrected with sentiment transitions, consistent with the view that the mispricing of these stocks is sentiment-driven. We show that the unconditional contrarian return predictability of sentiment, at least in the short-run, is due to the returns of stocks in sentiment transitions. Results show that ex post, sentiment is a momentum predictor if subsequent sentiment continues; and a contrarian predictor if subsequent sentiment transitions. We also show that the MAX effect can either be positive or negative contingent on sentiment dynamics and that the absence of a MAX effect following Low sentiment states suggested by prior studies is due to the completely offsetting negative MAX effect when sentiment continues in a Low state, and the positive MAX effect when sentiment transitions from a High to a Low state

Momentum returns, market states and financial crises. Evidence from China and Hong Kong

This chapter investigates the profitability of the momentum trading strategy in the stock exchanges of Shanghai, Shenzhen and Hong Kong over the period 1994 to 2010. Our results show that there are significantly large momentum returns for Shanghai and Hong Kong but small and insignificant momentum returns for Shenzhen. However, the momentum trading generates negative returns for all markets during the Global Financial Crisis; it appears that the momentum trading strategy fails during a financial or stock market crisis and especially in the months when the market conditions improve. We find no significant relationship between momentum returns and market states, which contradicts the results of an earlier study conducted in the U.S. market. Instead of market state it appears that it is economic activity that explains momentum returns

Maxing Out in China: Optimism or Attention?

Bali et al. (2011) document a maximum daily returns (MAX) premium in the US where stocks with the highest MAX underperform stocks with the lowest MAX in the subsequent month. However, the source of this MAX premium is contentious. Fong and Toh (2014) find that the MAX premium exclusively follows high sentiment periods suggesting that it is driven by investor optimism during high sentiment periods. In contrast Cheon and Lee (2017) find that the MAX premium is stronger following low sentiment periods suggesting that it is driven by the attention-grabbing characteristic of high MAX stocks in low sentiment periods. We present evidence from China consistent with the MAX premium being driven by investor optimism during high sentiment periods

Objectives, subsistence and farm development: the case of Tonga

Smallholder production is the main mode of agricultural production in Tonga. This report assesses the current practices with consideration to the farmers' attitudes, their traditional social institutions, cultural values and the effect this has on production. An independent village survey was used as the main source of primary data for this study. Analysis of agricultural performance and critiques of Tongan government policies toward agriculture not only identified the constraints on agricultural production but also indicated farmers' likely responses to policy changes. The modelled effects of different policy measures confirms that market development instruments, improved technologies and increasing farmer motivation can have a substantial and positive impact on farm revenue and commercial development. Based on the findings from this study, given appropriate types of improved technology, supportive agricultural policies (research and extension, market, land tenure, education, etc), and appropriate incentives, smallholder farmers can simultaneously pursue the goals of increasing national agricultural production and securing increased rural welfare