A forecast evaluation of capital investment in agriculture

A stochastic coefficients model developed by Swamy and Tinsley is used to forecast agricultural investment. In two sets of out-of-sample forecasts, one for 5 years, the other for 10 years, the Swamy-Tinsley stochastic coefficients model outperforms competing fixed and stochastic coefficients empirical models of agricultural investment for a wide array of risk functions. The Swamy-Tinsley stochastic coefficients investment model forecast continued declines in net investment for farm machinery, with greater declines toward the end of the forecast period. The Swamy-Tinsley method produced better predictions than both stochastic and fixed-coefficients competitors.