Risk Costs and the Choice of Market Return Index

摘要: Six measures of returns are used to estimate the most "appropriate" market index for southeast Kansas farms. Results suggest that localized indices more appropriate than state use as index. The was systematic and nonsystematic risk costs farm planning. Estimated risks depend on choice index, whereas aversion level. Rankings enterprises change when considered. More risk-averse specialized farmers not completely compensated risk. Farm income variability is a problem businesses deal with each year. diversification one method can be reduce However, it difficult understand plan because various sources often do riskreturn tradeoffs based upon correlations, means, standard deviations, risk-aversion coefficients. Meanvariance techniques derive efficient strategies usually consider an individual enterprise's contribution farm. In order farmer make decisions wisely, improved information about associated necessary. Including cost in enterprise budgets will allow begin see some risk-return occur comparing alternative enterprises. Considering may preferred ordering objective this study determine levels corresponding selection using from actual data. addition, article considers whether results differ definitions portfolio. Nonsystematic reduced diversifies, while not. If fully diversified, zero. A estimated subtracted budgeted returns. By estimating different enterprises, managers portfolios. single model (SIM) has been finance agriculture simplify needs mathematical programming models (Sharpe; Collins Barry; Turvey, Driver, Baker). It provides estimates represent variance-covariance structure Several studies have SIM either provide optimal combinations or (Collins Turvey Driver; Baker; Gempesaw et al.; Sharpe considered ex post literature (Frankfurter). Frankfurter found basis, performed well others. argued better efforts should made applications extension Barry deflated averages form Baker chose nominal al. detrended real Indiana net rate return assets possible indices. Thus, their