IDEAS home Printed from https://ideas.repec.org/p/ags/spaawp/125279.html
   My bibliography  Save this paper

Do producers exhibit disposition effect? Evidence from grain marketing

Author

Listed:
  • Mattos, Fabio

Abstract

The disposition effect is one of the most common types of behavior documented in inancial markets, and reflects the notion that investors tend to hold losing positions too long and close winning positions too fast. This idea can also be applied to grain marketing. The disposition effect would be related to whether producers sell their grain more readily when prices are “high” and wait longer when prices are “low”. This question is relevant because this type of behavior can affect marketing performance. If grain is sold too early, producers can miss opportunities to sell at higher price later. If producers hold their grain too long, price can go down and they will end up selling at a lower prices. Examination of pricing strategies of 15,564 wheat producers between 2003/04 and 2008/09 shows evidence of disposition effect in their marketing decisions. They seem to be eager to sell when the price offered by marketing contracts is above their reference price, and wait longer to sell when the price offered by marketing contracts is below their reference price.

Suggested Citation

  • Mattos, Fabio, 2012. "Do producers exhibit disposition effect? Evidence from grain marketing," Working Papers 125279, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    • Handle: RePEc:ags:spaawp:125279
    DOI: 10.22004/ag.econ.125279
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/125279/files/Mattos%202012%20SPAA%20working%20paper_wc.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.125279?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Locke, Peter R. & Mann, Steven C., 2005. "Professional trader discipline and trade disposition," Journal of Financial Economics, Elsevier, vol. 76(2), pages 401-444, May.
    2. Frino, Alex & Johnstone, David & Zheng, Hui, 2004. "The propensity for local traders in futures markets to ride losses: Evidence of irrational or rational behavior?," Journal of Banking & Finance, Elsevier, vol. 28(2), pages 353-372, February.
    3. Alan Collins & Wesley N. Musser & Robert Mason, 1991. "Prospect Theory and Risk Preferences of Oregon Seed Producers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 429-435.
    4. Brorsen, B. Wade & Anderson, Kim B., 2001. "Implications of Behavioral Finance for Farmer Marketing Strategy Recommendation," 2001 Conference, April 23-24, 2001, St. Louis, Missouri 18952, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    5. James S. Eales & Brian K. Engel & Robert J. Hauser & Sarahelen R. Thompson, 1990. "Grain Price Expectations of Illinois Farmers and Grain Merchandisers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 701-708.
    6. McNew, Kevin & Musser, Wesley N., 2002. "Farmer Forward Pricing Behavior: Evidence from Marketing Clubs," Agricultural and Resource Economics Review, Cambridge University Press, vol. 31(2), pages 200-210, October.
    7. Manel Baucells & Martin Weber & Frank Welfens, 2011. "Reference-Point Formation and Updating," Management Science, INFORMS, vol. 57(3), pages 506-519, March.
    8. Philip Brown & Nick Chappel & Ray Da Silva Rosa & Terry Walter, 2006. "The Reach of the Disposition Effect: Large Sample Evidence Across Investor Classes," International Review of Finance, International Review of Finance Ltd., vol. 6(1‐2), pages 43-78, March.
    9. Riley, John Michael & Anderson, John D., 2009. "Producer Perceptions of Corn, Soybean and Cotton Price Risk," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46865, Southern Agricultural Economics Association.
    10. Ravi Dhar & Ning Zhu, 2006. "Up Close and Personal: Investor Sophistication and the Disposition Effect," Management Science, INFORMS, vol. 52(5), pages 726-740, May.
    11. Shefrin, Hersh & Statman, Meir, 1985. "The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, American Finance Association, vol. 40(3), pages 777-790, July.
    12. Lewis A. Hagedorn & Scott H. Irwin & Darrel L. Good & Evelyn V. Colino, 2005. "Does the Performance of Illinois Corn and Soybean Farmers Lag the Market?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1271-1279.
    13. Humphrey, Steven J. & Verschoor, Arjan, 2004. "The probability weighting function: experimental evidence from Uganda, India and Ethiopia," Economics Letters, Elsevier, vol. 84(3), pages 419-425, September.
    14. repec:bla:jfinan:v:53:y:1998:i:5:p:1775-1798 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edika Quispe-Torreblanca & David Hume & John Gathergood & George Loewenstein & Neil Stewart, 2023. "At the Top of the Mind: Peak Prices and the Disposition Effect," Discussion Papers 2023-09, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    2. Vassilis A. Efthymiou & George N. Leledakis, 2014. "The price impact of the disposition effect on the ex-dividend day of NYSE and AMEX common stocks," Quantitative Finance, Taylor & Francis Journals, vol. 14(4), pages 711-724, April.
    3. Urs Fischbacher & Gerson Hoffmann & Simeon Schudy, 2017. "The Causal Effect of Stop-Loss and Take-Gain Orders on the Disposition Effect," The Review of Financial Studies, Society for Financial Studies, vol. 30(6), pages 2110-2129.
    4. Min Dai & Yipeng Jiang & Hong Liu & Jing Xu, 2023. "A Rational Theory for Disposition Effects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 47, pages 131-157, January.
    5. Hincapié-Salazar, Juliana & Agudelo, Diego A., 2020. "Is the disposition effect in bonds as strong as in stocks? Evidence from an emerging market," Global Finance Journal, Elsevier, vol. 46(C).
    6. Sarmiento, Julio & Rendón, Jairo & Sandoval, Juan S. & Cayon, Edgardo, 2019. "The disposition effect and the relevance of the reference period: Evidence among sophisticated investors," Journal of Behavioral and Experimental Finance, Elsevier, vol. 24(C).
    7. Maier, Johannes K. & Fischer, Dominik S., 2021. "Decomposing the Disposition Effect," Rationality and Competition Discussion Paper Series 288, CRC TRR 190 Rationality and Competition.
    8. Johannes Maier & Dominik S. Fischer, 2021. "Decomposing the Disposition Effect," CESifo Working Paper Series 9334, CESifo.
    9. Daniel W. Richards & Janette Rutterford & Devendra Kodwani & Mark Fenton-O'Creevy, 2017. "Stock market investors' use of stop losses and the disposition effect," The European Journal of Finance, Taylor & Francis Journals, vol. 23(2), pages 130-152, January.
    10. Dorn, Daniel & Strobl, Günter, 2023. "Rational disposition effects: Theory and evidence," Journal of Banking & Finance, Elsevier, vol. 153(C).
    11. Dalla Costa, Aldo Fortunato & Mollica, Vito & Singh, Abhay, 2021. "Payment methods and the disposition effect: Evidence from Indonesian mutual fund trading," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    12. Jakusch, Sven Thorsten, 2017. "On the applicability of maximum likelihood methods: From experimental to financial data," SAFE Working Paper Series 148, Leibniz Institute for Financial Research SAFE, revised 2017.
    13. Da Costa, Newton & Goulart, Marco & Cupertino, Cesar & Macedo, Jurandir & Da Silva, Sergio, 2013. "The disposition effect and investor experience," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1669-1675.
    14. Kahya, Evrim Hilal & Ekinci, Cumhur, 2022. "Disposition bias among Borsa Istanbul investors: What do we know about type, size and trading frequency?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 35(C).
    15. Jakusch, Sven Thorsten & Meyer, Steffen & Hackethal, Andreas, 2019. "Taming models of prospect theory in the wild? Estimation of Vlcek and Hens (2011)," SAFE Working Paper Series 146, Leibniz Institute for Financial Research SAFE, revised 2019.
    16. Shi-Woei Lin & Hui-Lung Huang, 2007. "Agent-Based Modeling To Investigate The Disposition Effect In Financial Markets," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(2), pages 145-163.
    17. Hermann, Daniel & Mußhoff, Oliver & Rau, Holger A., 2019. "The disposition effect when deciding on behalf of others," Journal of Economic Psychology, Elsevier, vol. 74(C).
    18. Bouteska, Ahmed & Kabir Hassan, M. & Gider, Zeynullah & Bataineh, Hassan, 2024. "The role of investor sentiment and market belief in forecasting V-shaped disposition effect: Evidence from a Bayesian learning process with DSSW model," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    19. Richards, Daniel W. & Fenton-O'Creevy, Mark & Rutterford, Janette & Kodwani, Devendra G., 2018. "Is the disposition effect related to investors’ reliance on System 1 and System 2 processes or their strategy of emotion regulation?," Journal of Economic Psychology, Elsevier, vol. 66(C), pages 79-92.
    20. van Dooren, Bono & Galema, Rients, 2018. "Socially responsible investors and the disposition effect," Journal of Behavioral and Experimental Finance, Elsevier, vol. 17(C), pages 42-52.

    More about this item

    Keywords

    Financial Economics; Institutional and Behavioral Economics; Marketing;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:spaawp:125279. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://servsas.fsaa.ulaval.ca/index.php?id=12482&L=1 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.