A multi-factor capital asset pricing model is used to examine the return characteristics of physical assets comprising the farm asset portfolio. Physical assets analyzed are: 1) farm real estate; 2) machinery and motor vehicles; 3) crops stored on farm; and 4) livestock and poultry. Results for the years 1950-1990 indicate that unexpected inflation is more appropriate than the more commonly used realized inflation factor; and that the systematic risk component to these asset classes is, in general, low. Further, excess returns measures are significant for farmland, machinery, and crops stores on farm but not for livestock and poultry.


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