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Agricultural Arbitrage and Risk Preferences

Author

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  • Pope, Rulon D.
  • LaFrance, Jeffrey T.
  • Just, Richard E.

Abstract

A structural inter-temporal model of agricultural asset arbitrage equilibrium is developed and applied to agriculture in the North-Central region of the U.S. The data is consistent with unifying level of risk aversion. The levels of risk aversion are more plausible than previous estimates for agriculture. However, the standard arbitrage equilibrium is rejected; perhaps this is due to the period and the shortness of the period studied.

Suggested Citation

  • Pope, Rulon D. & LaFrance, Jeffrey T. & Just, Richard E., 2007. "Agricultural Arbitrage and Risk Preferences," CUDARE Working Papers 7189, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:7189
    DOI: 10.22004/ag.econ.7189
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    2. Robert G. Chambers & Daniel C. Voica, 2017. "“Decoupled” Farm Program Payments are Really Decoupled: The Theory," American Journal of Agricultural Economics, John Wiley & Sons, vol. 99(3), pages 773-782, April.
    3. Jesse Tack & Rulon Pope & Jeffrey LaFrance & Timothy Graciano & Scott Colby, 2012. "Intertemporal Risk Management in Agriculture," Monash Economics Working Papers 16-12, Monash University, Department of Economics.
    4. Féménia, Fabienne & Gohin, Alexandre, 2011. "Dynamic modelling of agricultural policies: The role of expectation schemes," Economic Modelling, Elsevier, vol. 28(4), pages 1950-1958, July.
    5. Karina Schoengold & David L. Sunding, 2014. "The impact of water price uncertainty on the adoption of precision irrigation systems," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 729-743, November.
    6. Bontemps, Christophe & Bougherara, Douadia & Nauges, Céline, 2020. "Do Risk Preferences Really Matter? The Case of Pesticide Use in Agriculture," TSE Working Papers 20-1095, Toulouse School of Economics (TSE).
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    8. Zhao, Xin & Brady, Michael P. & Tozer, Peter R., 2015. "Do Farmers Really Plant Apples for Their Income and Cherries for Their Retirement? The Effects of Risk, Scope and Scale on Orchard Land Allocation," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205663, Agricultural and Applied Economics Association.
    9. Gohin, Alexandre & Zheng, Yu, 2020. "Reforming the European Common Agricultural Policy: From price & income support to risk management," Journal of Policy Modeling, Elsevier, vol. 42(3), pages 712-727.
    10. Hiroshi Nakamura & Naohiko Wakutsu, 2019. "Reducing pharmaceutical reimbursement price risk to lower national health expenditures without lowering R&D incentives," International Journal of Economic Policy Studies, Springer, vol. 13(1), pages 75-88, January.
    11. Benjamin Dequiedt & Emmanuel Servonnat, 2016. "Risk as a limit or an opportunity to mitigate GHG emissions? The case of fertilisation in agriculture," Working Papers 1606, Chaire Economie du climat.
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    13. Nauges, Celine & Wheeler, Sarah Ann & Zuo, Alec, 2016. "Elicitation of irrigators’ risk preferences from observed behaviour," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(3), July.
    14. Voica, Daniel C., 2017. "The Effect of the Single Farm Payment Timing on Production Incentives," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258024, Agricultural and Applied Economics Association.
    15. Zuo, Alec & Nauges, Celine & Wheeler, Sarah, 2012. "Water trading as a risk-management tool for farmers: new empirical evidence from the Australian water market," Risk and Sustainable Management Group Working Papers 149885, University of Queensland, School of Economics.
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    More about this item

    Keywords

    Risk and Uncertainty;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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