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How To Group Market Participants? Heterogeneity In Hedging Behavior

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Listed author(s):
  • Pennings, Joost M.E.
  • Garcia, Philip
  • Irwin, Scott H.
  • Good, Darrel L.

Abstract

Using a generalized mixture model, we model individual heterogeneity by identifying groups of participants that respond in a similar manner to the determinants of economic behavior. The procedure emphasizes the role of theory as the determinants of behavior are used to simultaneously explain market activities and to discriminate among groups of market participants. We show the appealing properties of this modeling approach by comparing it with two often used grouping methods in an empirical study in which we estimate the factors affecting market participants' hedging behavior.

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File URL: http://purl.umn.edu/21963
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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2003 Annual meeting, July 27-30, Montreal, Canada with number 21963.

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Date of creation: 2003
Handle: RePEc:ags:aaea03:21963
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Keywords: Institutional and Behavioral Economics;

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  15. Pennings, Joost M. E. & Garcia, Philip, 2004. "Hedging behavior in small and medium-sized enterprises: The role of unobserved heterogeneity," Journal of Banking & Finance, Elsevier, vol. 28(5), pages 951-978, May.
  16. Rolfo, Jacques, 1980. "Optimal Hedging under Price and Quantity Uncertainty: The Case of a Cocoa Producer," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 100-116, February.
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