Relaxing Heteroscedasticity Assumptions in Area-Yield Crop Insurance Rating

Ardian Harri, Keith Coble, Alan Ker and Barry J. Goodwin

American Journal of Agricultural Economics, 2011, vol. 93, issue 3, 703-713

Abstract: This article focuses on the effect of differing heteroscedasticity assumptions on derived premium rates of area-yield crop insurance. Tests of the proportional and absolute heteroscedasticity assumptions are conducted using both in-sample and out-of-sample measures. Our results suggest that arbitrarily imposing a specific form of heteroscedasticity or homoscedasticity in insurance rate calculations limits actuarial soundness. Our results have practical implications for the federal crop insurance programs, as we reject the traditional rating assumptions for many cotton regions and lower-yielding/higher-risk corn and soybean counties but not in the heart of the Cornbelt. Copyright 2011, Oxford University Press.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (42)

Downloads: (external link)
http://hdl.handle.net/10.1093/ajae/aar009 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
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:oup:ajagec:v:93:y:2011:i:3:p:703-713

Access Statistics for this article

American Journal of Agricultural Economics is currently edited by Madhu Khanna, Brian E. Roe, James Vercammen and JunJie Wu

More articles in American Journal of Agricultural Economics from Agricultural and Applied Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().