Instructor:        Charles B. Moss
Office:            1130B McCarty Hall
Phone:             392-1845 Ext 404
Email:             cbmoss@mail.ifas.ufl.edu
Office Hours:      M-W-F 9:30-12:00

Purpose:  The purpose of this course is to introduce students to some theoretical issues and 
quantitative techniques used by specialist in Agricultural Finance.  Emphasis will be placed 
on the choice-theoretic nature of the financial problem set.  Further, the course will reflect
a quantitative bias to financial modeling.

Text - Required:

Bussey, Lynn E. The Economic Analysis of Industrial Projects (Englewood Cliffs, New Jersey: 
       Prentice-Hall, Inc., 1978).

Text - Suggested:

Fama, Eugene, F. and Merton H. Miller. The Theory of Finance (Hinsdale, Illinois: Dryden Press, 1972).

Hirshleifer, Jack. Investment, Interest, and Capital (Englewood Cliffs, New Jersey: Prentice-Hall, 
       Inc., 1970).

Grading: Grades will be assigned based on the following weights:

Test          2*100     200     50%
Homework                100     25%
Research Proposal       100     25%
                        400	

The research proposal is not intended to be a completed research product.  Instead, I would like 
the student to propose an interesting problem that can be solved using of the techniques from this 
course.

Deterministic Investment Analysis

Theory of Net Present Value Techniques

Lecture I: Robinson Crusoe Economy and Investment PDF

Robinson Crusoe Economy and Investments

Pierce, James L. Monetary and Financial Economics (New York: John Wiley and Sons, 1984): 31-69.
*Hirshleifer, Jack. Investment, Interest and Capital pp. 31-45.
Fama, Eugene, F. and Merton H. Miller. The Theory of Finance pp. 16-40.
Bussey, Lynn E. The Economic Analysis of Industrial Projects pp 32-69.

Capital Theory

Samuelson, Paul A. "Some Aspects of the Pure Theory of Capital." Quarterly Journal of Economics LI(1936-37): 469-96.

Net Present Value-The Mechanics

Lecture II: Single Investment, PDF
Lecture III: Net Present Value and IRR, PDF,Excel Spreadsheet. Notes on Newton's Method
Lecture IV: Investments of Different Lives, PDF,Excel Spreadsheet

*Bussey, Lynn E. The Economic Analysis of Industrial Projects pp. 188-238.
Hirshleifer, Jack. Investment, Interest, and Capital pp. 46-98.

Multiple Projects

Lecture V: Finish Single Investment and Start Multiple Investment, PDF
Lecture VI: Multiple Investment Problem, PDF

*Bussey, Lynn E. The Economics Analysis of Industrial Projects pp. 244-81.

Other Topics

Inclusion or Exclusion of Debt Flows

Moss, Charles B. "A Choice Theoretic Perspective on Including Financing Flows in Net Present Value."

Appropriate Cost of Capital
Internal Rate of Return and Irrelevance

Dudley, Carlton L., Jr. "A Note on Reinvestment Assumptions in Choosing Between Net Present Value and Internal Rate of Return." Journal of Finance 22(Sept. 1972): 907-15.

Risk in Finance

St. Petersburg Paradox

Bussey, Lynn E. The Economic Analysis of Industrial Projects pp. 338-40.
Machina, Mark J. "Choice Under Uncertainty: Problems Solved and Unsolved." Journal of Economic Perspectives 1(Summer 1987): 121-54.

Expected Utility Hypothesis

Lecture VII: Expected Utility Maxim PDF Notes

See notes for AEB 6182 on utility maximization Lecture I

Lecture VIII: Expected Utility Hypothesis-Basis for Applied Work PDF Notes

See notes for AEB 6182 on Expected Utility Lecture II, Transformations of Risk Aversion Coefficients Lecture VI, and Mean-Variance Lecture VII and Lecture VIII.

Lecture IX: Risk and Investment Through Time PDF Notes

Moss, Charles B. "A Financial Economics Perspective on Expected Utility." Department of Food and Resource Economics, University of Florida, Staff Paper.
Bussey, Lynn E. The Economic Analysis of Industrial Projects pp. 340-69.

Expected Utility and Quadratic Programming

Bussey, Lynn E. The Economic Analysis of Industrial Projects pp. 367-69.
*Jean, William H. The Analytical Theory of Finance Chapters 4 and 5.
Levy, H. and H. M. Markowitz. "Approximating Expected Utility by a Function of Mean and Variance." American Economic Review 69(1979): 308-17.
Kroll, Yoram, Hiam Levy, and Harry M. Markowitz. "Mean-Variance Versus Direct Utility Maximization." Journal of Finance 39(March 1984): 47-61.
Moss, Charles B., Allen M. Featherstone, and Timothy G. Baker. "Agricultural Assets in an Efficient Multiperiod Investment Portfolio." Agricultural Finance Review 47(1987): 82-94.

Direct Utility Maximization

*Kaylen, Michael S., Paul V. Preckel, and Edna T. Loehman. "Risk Modeling via Direct Utility Maximization Using Numerical Quadrature." American Journal of Agricultural Economics 69(August 1987): 701-6.
*Featherston, Allen M., Charles B. Moss, Timothy G. Baker, and Paul V. Preckel. "The Theoretical Effects of Farm Policies on Optimal Leverage and the Probability of Equity Loss." American Journal of Agricultural Economics
Market Valuation of Risk

Capital Asset Pricing Models

Lecture X: Capital Asset Pricing Model: Part I PDF Notes

See also notes for AEB 6182 on portfolio theory Lecture V

Lecture XI: Capital Asset Pricing Model: Part II PDF Notes

See also notes for AEB 6182 on market models Lecture XII

Lecture XII: Capital Asset Pricing Model: Part III PDF Notes

Bussey, Lynn E. The Economic Analysis of Industrial Projects pp. 419-63.
Levey, Hiam and Marshall Sarnat. Portfolio and Investment Selection: Theory and Practice (Englewood Cliffs, New Jersey: Prentice-Hall Int., 1984): 395-429.
Fama, Eugene F. and James D. MacBeth. "Risk, Return, and Equilibrium: Empirical Tests." Journal of the Political Economy 38(May 1973): 607-36.

Arbitrage Pricing Theory

Huberman, Gur. "A Simple Approach to Arbitrage Pricing Theory." Journal of Economic Theory 28(1982): 183-91.
Roll, Richard and Stephen A. Ross. "An Empirical Investigation of the Arbitrage Pricing Theory." Journal of Finance 25(December 1980): 1073-103.

Applications to Agricultural Economics

Barry, Peter J. "Capital Asset Pricing and Farm Real Estate." American Journal of Agricultural Economics 62(1980): 549-53.

Models of Agricultural Debt

Certainty and the No-Choice Case: Applications of Boundary Conditions
Modigliani-Miller Theorem: The Case of Traded Equities

*Modigliani, Franco and Merton H. Miller "The Cost of Capital, Corporate Finance, and the Theory of Investment." American Economic Review 48(June 1958): 261-97.
Stiglitz, Joseph E. "A Re-Examination of the Modigliani-Miller Theorem."

Uncertainty and Optimal Leverage

Lecture XIII: Optimal Debt Choice PDF Notes

*Barry, Peter J., C. B. Baker and Luis Sanint. "Farmer's Credit Risks and Liquidity Management." American Journal of Agricultural Economics (May 1981): 216-27.
*Collins, Robert A. "Expected Utility, Debt-Equity Structure, and Risk Balancing." American Journal of Agricultural Economics 67(August 1985): 627-29.
*Featherstone, Allen M., Charles B. Moss, Timothy G. Baker, and Paul V. Preckel. "The Theoretical Effects of Farm Policies on Optimal Leverage and the Probability of Equity Loss." American Journal of Agricultural Economics 70(3) (August 1988): 572-79.
*Moss, Charles B., Stephen A. Ford, and William G. Boggess. "Capital Gains, Optimal Leverage, and the Probability of Equity Loss: A Theoretical Model." Agricultural Finance Review 49(1989): 127-34.
*Moss, Charles B., J.S. Shonkwiler, and Stephen A. Ford. "A Risk Endogenous Model of Aggregate Agricultural Debt." Agricultural Finance Review 50(1990): 73-79.
Moss, Charles B., Stephen A. Ford, and Mario Castejon. "Effect of Debt Position on the Choice of Marketing Strategies for Florida Orange Growers: A Risk Efficiency Approach." Southern Journal of Agricultural Economics 23(2) (December 1991): 103-12.
See notes for AEB 6182 on Stochastic Dominance Lecture VII, Lecture IX, and Lecture X.
Also see Moss, Charles B. "Implementation of Stochastic Dominance: A Nonparametric Kernel Approach." SP 01-6.
Ramirez, Octavio A., Charles B. Moss, and William G. Boggess. "A Stochastic Optimal Control Formulation of the Consumption/Debt Decision." Agricultural Finance Review 57(1997): 29-38.
See notes for AEB 6533 on Stochastic Optimal Control Lecture XXV, and Lecture XXVI