Portfolios of Agricultural Market Advisory Services: How Much Diversification is Enough?

Silvina M. Cabrini, Brian G. Stark, Scott Irwin, Darrel L. Good and Joao Gomes Martines-Filho
Authors registered in the RePEc Author Service: João Gomes Martines Filho

Journal of Agricultural and Applied Economics, 2005, vol. 37, issue 01, 14

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.

Keywords: Agricultural Finance; Crop Production/Industries; Marketing (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/43717/files/101-114.pdf (application/pdf)

Related works:
Journal Article: Portfolios of Agricultural Market Advisory Services: How Much Diversification Is Enough? (2005)
Working Paper: PORTFOLIOS OF AGRICULTURAL MARKET ADVISORY SERVICES: HOW MUCH DIVERSIFICATION IS ENOUGH? (2004)
Working Paper: PORTFOLIOS OF AGRICULTURAL MARKET ADVISORY SERVICES: HOW MUCH DIVERSIFICATION IS ENOUGH? (2003)
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:joaaec:43717

DOI: 10.22004/ag.econ.43717

Access Statistics for this article

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