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Risk Behavior and Rational Expectations in the U.S. Broiler Market

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  • Satheesh V. Aradhyula
  • Matthew T. Holt

Abstract

This study examines the empirical implications of extending the rational expectations hypothesis (REH) to include price uncertainty. A general estimation framework that incorporates both the restrictions on structural parameters and the variance-covariance terms is developed. GARCH time-series processes are used to generate time-varying expectations of both the means and the variances of exogenous variables. The empirical application is with a quarterly model of the U.S. broiler industry; the results indicate that the rational expectation of price variance is an important determinant of broiler supply. A formal test indicates that the restrictions implied by the REH cannot be rejected.

Suggested Citation

  • Satheesh V. Aradhyula & Matthew T. Holt, 1989. "Risk Behavior and Rational Expectations in the U.S. Broiler Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(4), pages 892-902.
    • Handle: RePEc:oup:ajagec:v:71:y:1989:i:4:p:892-902.
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    File URL: http://hdl.handle.net/10.2307/1242667
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