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Estimation and Use of a Multivariate Parametric Model for Simulating Heteroskedastic, Correlated, Nonnormal Random Variables: The Case of Corn Belt Corn, Soybean, and Wheat Yields

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  • Octavio A. Ram�rez
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    Abstract

    This study develops a multivariate, nonnormal density function that can accurately and separately account for skewness, kurtosis, heteroskedasticity, and the correlation among the random variables of interest. The statistical attributes of the underlying random variables and correlation processes are examined. The potential applications of this modeling tool are discussed and exemplified by analyzing and simulating Corn Belt corn, soybean, and wheat yields. While corn and soybean yields are found to be skewed and kurtotic and exhibit different variances through time, wheat yields appear normal but also heteroskedastic. A strong correlation is detected between corn and soybean yields. Copyright 1997, Oxford University Press.

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    Bibliographic Info

    Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

    Volume (Year): 79 (1997)
    Issue (Month): 1 ()
    Pages: 191-205

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    Handle: RePEc:oup:ajagec:v:79:y:1997:i:1:p:191-205

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    Cited by:
    1. Kim, Kwansoo & Chavas, Jean-Paul, 2001. "Technological Change And Risk Management: An Application To The Economics Of Corn Production," 2001 Annual meeting, August 5-8, Chicago, IL 20605, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Mason, C. & Hayes, Dermot J. & Lence, Sergio H., 2001. "Systemic Risk in U.S. Crop and Revenue Insurance Programs," Staff General Research Papers 11396, Iowa State University, Department of Economics.
    3. Octavio A. Ramirez & Carlos A. Carpio, 2012. "Premium estimation inaccuracy and the actuarial performance of the US crop insurance program," Agricultural Finance Review, Emerald Group Publishing, vol. 72(1), pages 117-133, March.
    4. Ramirez, Octavio A. & Somarriba, Eduardo, 2000. "Risk And Returns Of Diversified Cropping Systems Under Nonnormal, Cross-, And Autocorrelated Commodity Price Structures," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December.
    5. Clop-Gallart, M. Merce & Juarez-Rubio, Francisco, 2008. "Shape Persistence in Elicited Subjective Crop Yield Probability Density Functions," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44128, European Association of Agricultural Economists.
    6. Ghosh, Somali & Woodard, Joshua D. & Vedenov, Dmitry V., 2011. "Efficient Estimation of Copula Mixture Model: An Application to the Rating of Crop Revenue Insurance," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103738, Agricultural and Applied Economics Association.
    7. Mason, Chuck & Hayes, Dermot J. & Lence, Sergio H., 2003. "Systemic Risk in U.S. Crop Reinsurance Programs," Staff General Research Papers 1944, Iowa State University, Department of Economics.
    8. Vedenov, Dmitry V., 2008. "Application of Copulas to Estimation of Joint Crop Yield Distributions," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6264, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Roberts, Matthew C. & Goodwin, Barry K. & Coble, Keith H., 1998. "Measurement Of Price Risk In Revenue Insurance: Implications Of Distributional Assumptions," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20840, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Ramirez, Octavio A. & Carpio, Carlos E. & Rejesus, Roderick M., 2011. "Can Crop Insurance Premiums Be Reliably Estimated?," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 40(1), April.
    11. Clop-Gallart, M. Merce & Juarez-Rubio, Francisco, 2005. "Elicitation of Subjective Crop Yield PDF for DSS Implementation," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24561, European Association of Agricultural Economists.
    12. Awondo, Sebastain N. & Datta, Gauri S. & Ramirez, Octavio A. & Fonsah, Esendugue Greg, 2012. "Estimation of crop yield distribution and Insurance Premium using Shrinkage Estimator: A Hierarchical Bayes and Small Area Estimation Approach," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 126778, Agricultural and Applied Economics Association.
    13. Jindřich Špička, 2009. "The Risk Analysis in the Agricultural Enterprises using Earnings at Risk Method," Ekonomika a Management, University of Economics, Prague, vol. 2009(3).
    14. Zapata, Hector O. & Maradiaga, David Isaias & Pujula, Aude Liliana & Dicks, Michael R., 2011. "Recent Developments in Unit Root Tests and Historical Crop Yields," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103871, Agricultural and Applied Economics Association.
    15. Chavas, Jean-Paul & Kim, Kwansoo & Lauer, Joseph G. & Klemme, Richard M. & Bland, William L., 2001. "An Economic Analysis Of Corn Yield, Corn Profitability, And Risk At The Edge Of The Corn Belt," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), July.
    16. Colson, Gregory & Fu, Shengfei & Ramirez, Octavio A., 2012. "Crop Insurance Savings Accounts," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124739, Agricultural and Applied Economics Association.

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