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Examining the Risk-Return Relationship between Agribusiness Stocks and the Market

Author

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  • Dorfman, Jerey H.
  • Park, Myung D.

Abstract

Volatility and the trade-off between risk and returns have been considered key components of finance theory at least since Merton's intertemporal capital asset pricing model (ICAPM, 1973). In this study, we employ several bivariate GARCH-M models to investigate Merton's ICAPM for agribusiness industries and examine the best speci_x000C_cation to use in estimating the relationship of asset returns in these industries with the broader market. The expected positive relation between stock return and its risk holds for both industries and we found a high posterior probability of a positive tradeo_x000B_ for the agricultural production portfolio.

Suggested Citation

  • Dorfman, Jerey H. & Park, Myung D., 2010. "Examining the Risk-Return Relationship between Agribusiness Stocks and the Market," 2010 Conference, April 19-20, 2010, St. Louis, Missouri 285329, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccc10:285329
    DOI: 10.22004/ag.econ.285329
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    References listed on IDEAS

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