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The Effects of Holding Nonfarm Related Financial Assets On Risk-Adjusted Farm Income

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  • Betubiza, Eustacius N.
  • Leatham, David J.

Abstract

A discrete stochastic programming model is formulated to study the gains from diversification when farming operations are augmented with off-farm financial assets that are not highly correlated with returns from farming. We extend past research by considering the dynamics of accumulating these financial assets and the farm's leverage and tenure position. Results show that farmers' income level and stability can be improved by including nonfarm financial assets in their portfolios.

Suggested Citation

  • Betubiza, Eustacius N. & Leatham, David J., 1994. "The Effects of Holding Nonfarm Related Financial Assets On Risk-Adjusted Farm Income," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(2), pages 565-579, December.
    • Handle: RePEc:cup:jagaec:v:26:y:1994:i:02:p:565-579_02
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    References listed on IDEAS

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    1. David J. Leatham & Timothy G. Baker, 1988. "Farmers' Choice of Fixed and Adjustable Interest Rate Loans," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(4), pages 803-812.
    2. McCarl, Bruce A. & Bessler, David A., 1989. "Estimating An Upper Bound On The Pratt Risk A Version Coefficient When The Utility Function Is Unknown," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 33(1), pages 1-8, April.
    3. Calum G. Turvey & Timothy G. Baker, 1990. "A Farm-Level Financial Analysis of Farmers' Use of Futures and Options under Alternative Farm Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(4), pages 946-957.
    4. Featherstone, Allen M. & Baker, Timothy G., 1986. "Farm Portfolio Adjustments To The Elimination Of U.S. Target And Support Price Provisions," 1986 Regional Committee NC-161, October 7-8, 1986, St. Paul, Minnesota 127210, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    5. McCarl, Bruce A., 1986. "Innovations In Programming Techniques For Risk Analysis," Regional Research Projects > 1986: S-180 Annual Meeting, March 23-26, 1986, Tampa, Florida 271825, Regional Research Projects > S-180: An Economic Analysis of Risk Management Strategies for Agricultural Production Firms.
    6. K. D. Cocks, 1968. "Discrete Stochastic Programming," Management Science, INFORMS, vol. 15(1), pages 72-79, September.
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