Systematic and Nonsystematic Risk in Farm Portfolio Selection

Calum Turvey, H. C. Driver and Timothy Baker ()

American Journal of Agricultural Economics, 1988, vol. 70, issue 4, 831-836

Abstract: The concepts of systematic and nonsystematic risk are evaluated as risk measures in farm planning models. A diagonal quadratic programming model based upon a single-index model yields farm plans similar to the full variance-covariance quadratic program with four of thirteen farm plans being identical. Surprisingly, a linear programming model using only systematic risk produces farm plans that are identical to the full variance-covariance quadratic program for eleven of thirteen income levels. Accordingly, it is suggested that single-index-based programming models may prove to be practical alternatives for deriving mean-variance-efficient farm plans.

Date: 1988
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