MEAN-VARIANCE VERSUS MEAN–EXPECTED SHORTFALL MODELS: AN APPLICATION TO WHEAT VARIETY SELECTION

Kunlapath Sukcharoen and David Leatham ()

Journal of Agricultural and Applied Economics, 2016, vol. 48, issue 2, 148-172

Abstract: One of the most popular risk management strategies for wheat producers is varietal diversification. Previous studies proposed a mean-variance model as a tool to optimally select wheat varieties. However, this study suggests that the mean–expected shortfall (ES) model (which is based on a downside risk measure) may be a better tool because variance is not a correct risk measure when the distribution of wheat variety yields is multivariate nonnormal. Results based on data from Texas Blacklands confirm our conjecture that the mean-ES framework performs better in term of selecting wheat varieties than the mean-variance method.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jagaec:v:48:y:2016:i:02:p:148-172_00

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