Structural breaks and agricultural asset allocation

Abstract

Structural breaks have been found to have large effects on optimal investment allocations. This analysis empirically tests for a structural break and then evaluates the impact the break has on the optimal allocation of agricultural and nonagricultural investments using a mean‐variance model. Results indicate nonfarm investors could enhance their portfolios by investing in farm assets. However, the results suggest that the allocation of assets prior to the structural break in the early 1950s is much greater than the time period following the break and the entire 1926‐2004 time period. Typically, portfolio research has not tested for structural breaks and this may adversely affect decisions on investment allocation.

Citation

Pendell, D.L. and Featherstone, A.M. (2007), "Structural breaks and agricultural asset allocation", Agricultural Finance Review, Vol. 67 No. 2, pp. 259-278. https://doi.org/10.1108/00214660780001208