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Journal of Agricultural and Applied Economics >
Volume 37, Number 01, April 2005 >
Please use this identifier to cite or link to this item:
http://purl.umn.edu/43717
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| Title: | Portfolios of Agricultural Market Advisory Services: How Much Diversification is Enough? |
| Authors: | Cabrini, Silvina M.
Stark, Brian G.
Irwin, Scott H.
Good, Darrel L.
Martines-Filho, Joao |
| Keywords: | corn
diversification
market advisory service
portfolio
soybeans |
| JEL Codes: | G11
Q10
Q12
Q14 |
| Issue Date: | 2005-04 |
| Abstract: | This study analyzes the potential risk-reduction gains from naïve diversification among market advisory services for corn and soybeans. The total possible decrease in risk through naïve diversification is small, mainly because advisory prices are highly correlated on average. Moreover, because marginal risk-reduction benefits decrease rapidly with size and the cost of holding the portfolios increases linearly due to services’ subscription fees, it is optimal to limit portfolio size to a few advisory programs. Based on certainty equivalent measures and two representative risk-aversion levels, preferred portfolio sizes are between one and three programs. |
| URI: | http://purl.umn.edu/43717 |
| Institution/Association: | Journal of Agricultural and Applied Economics>Volume 37, Number 01, April 2005 |
| Total Pages: | 14 |
| From Page: | 101 |
| To Page: | 114 |
| Collections: | Volume 37, Number 01, April 2005
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| 101-114.pdf | | 1058Kb | PDF | View/Open |
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