Do Farmers Hedge Optimally or by Habit? A Bayesian Partial-Adjustment Model of Farmer Hedging

Jeffrey Dorfman () and Berna Karali

Journal of Agricultural and Applied Economics, 2010, vol. 42, issue 4, 791-803

Abstract: Hedging is one of the most important risk management decisions that farmers make and has a potentially large role in the level of profit eventually earned from farming. Using panel data from a survey of Georgia farmers that recorded their hedging decisions for 4 years on four crops, we examine the role of habit, demographics, farm characteristics, and information sources on the hedging decisions made by 57 different farmers. We find that the role of habit varies widely and that estimation of a single habit effect suffers from aggregation bias. Thus, modeling farmer-level heterogeneity in the examination of habit and hedging is crucial.

Date: 2010
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Journal Article: Do Farmers Hedge Optimally or by Habit? A Bayesian Partial-Adjustment Model of Farmer Hedging (2010)
Working Paper: Do Farmers Hedge Optimally or by Habit? A Bayesian Partial-Adjustment Model of Farmer Hedging (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jagaec:v:42:y:2010:i:04:p:791-803_00

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