Should Farmers Invest in Financial Assets as a Risk Management Strategy? Some Evidence from New Zealand

Gilbert Nartea, Juan M. Pellegrino and Paul Webster

No 24376, 14th Congress, Perth, Western Australia, August 10-15, 2003 from International Farm Management Association

Abstract: Off-farm investment as a risk management strategy is not widespread among New Zealand sheep and beef farmers. This study explores the potential for risk reduction by the diversification of farm asset portfolios to include financial investments such as industrial equities and government bonds of various types. Results show that the negative correlations between long-run rates of return on farm assets and financial investments could result in a significant reduction of risk if equities and bonds were included in farm investment portfolios. However, when combined with information about attitudes to risks, it does not seem likely that farmers would adopt such strategies purely in order to stabilise incomes. Deregulation of the New Zealand economy in the mid 1980's had little impact on farmers' optimal allocation of their assets.

Keywords: Agricultural Finance; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 10
Date: 2003
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Related works:
Journal Article: Should farmers invest in financial assets as a risk management strategy? Some evidence from New Zealand (2008)
Journal Article: Should farmers invest in financial assets as a risk management strategy? Some evidence from New Zealand * (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ifma03:24376

DOI: 10.22004/ag.econ.24376

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