Impact of Ranch and Market Factors on an Index of Agricultural Holding Period Returns

Abstract

This study develops nominal and real holding period return indices for operating ranches. The indices contain two components, monthly ranch operating profit and capital appreciation. A regression model that determines the effect of various attributes on total market value is used to estimate capital appreciation, and a second model determines operating profit. The two different ranch data series are compared with United States Long Term Government Bonds, the S&P 500 Index and Small Capitalization Stocks. Both ranch indices show very low correlation with the S&P 500 Index and very low or negative betas. Further, both ranch series have excess actual nominal and real returns when compared to expected returns determined from the Capital Asset Pricing Model.