Is Hedging a Habit? Hedging Ratio Determination of Cotton Producers

Jeffrey Dorfman (), Joost Pennings () and Philip Garcia

Journal of Agribusiness, 2010, vol. 28, issue 01, 18

Abstract: We examine the role that habit plays when producers determine their hedge ratio. Data were collected from U.S. cotton growers in which they indicated their hedging position in 2001 and 2002 as well as their perceived profitability, land ownership structure, and income. To account for heterogeneity, a generalized mixture regres-sion model is used to identify the influence of the determinants of the hedge ratio. Our results identified two segments. In the smaller segment, consisting of 35% of the producers, habit did not affect the hedge ratio; instead, land ownership and perceived profitability were most influential. In the larger segment, consisting of 65% of the producers, the hedge ratio was solely driven by habit. The results show the important role of habit formation in understanding producers’ employed hedge ratio, confirm the importance of heterogeneity, and strengthen the relation-ship between financial structure and market-risk mitigating behavior.

Keywords: Financial Economics; Research Methods/Statistical Methods (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ageconsearch.umn.edu/record/131313/files/JAB_Spr2010__03.pdf (application/pdf)

Related works:
Journal Article: Is Hedging a Habit? Hedging Ratio Determination of Cotton Producers (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:jloagb:131313

DOI: 10.22004/ag.econ.131313

Access Statistics for this article

More articles in Journal of Agribusiness from Agricultural Economics Association of Georgia Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().