IDEAS home Printed from https://ideas.repec.org/p/ags/ucbecw/37852.html
   My bibliography  Save this paper

Portfolio Choice with Uncertain Consumption Prices: a mean-variance approch

Author

Listed:
  • Berck, Peter
  • Cecchetti, Stephen G.

Abstract

This paper presents a mean-variance model of portfolio choice and asset pricing when the price of consumption goods as well as the return to assets is uncertain. The correlation of an assets return with purchases at expected prices is shown to reduce both the mean return and the variance of the return of an asset. A numerical approximation is computed to check the accuracy of the mean and variance approximation. Uncertainty of consumption prices is shown to result in long (or speculative) futures holding.

Suggested Citation

  • Berck, Peter & Cecchetti, Stephen G., 1980. "Portfolio Choice with Uncertain Consumption Prices: a mean-variance approch," CUDARE Working Papers 37852, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:37852
    DOI: 10.22004/ag.econ.37852
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/37852/files/CUDARE%20158%20Berck.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.37852?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul H. Cootner, 1960. "Returns to Speculators: Telser versus Keynes," Journal of Political Economy, University of Chicago Press, vol. 68(4), pages 396-396.
    2. Hagerman, Robert L. & Kim, E. Han, 1976. "Capital Asset Pricing with Price Level Changes," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 11(3), pages 381-391, September.
    3. Grauer, Frederick L A & Litzenberger, Robert H, 1979. "The Pricing of Commodity Futures Contracts, Nominal Bonds and Other Risky Assets under Commodity Price Uncertainty," Journal of Finance, American Finance Association, vol. 34(1), pages 69-83, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yulia Merkoulova, 2020. "Predictive abilities of speculators in energy markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(5), pages 804-815, May.
    2. Loïc Maréchal, 2023. "A tale of two premiums revisited," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(5), pages 580-614, May.
    3. Carl R. Zulauf & Scott H. Irwin, 1998. "Market Efficiency and Marketing to Enhance Income of Crop Producers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 20(2), pages 308-331.
    4. Robert Jarrow, 2010. "Convenience yields," Review of Derivatives Research, Springer, vol. 13(1), pages 25-43, April.
    5. Balcilar, Mehmet & Gungor, Hasan & Hammoudeh, Shawkat, 2015. "The time-varying causality between spot and futures crude oil prices: A regime switching approach," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 51-71.
    6. Chen, Yu-Lun & Mo, Wan-Shin, 2023. "Determinants and dynamic interactions of trader positions in the gold futures market," Journal of Commodity Markets, Elsevier, vol. 31(C).
    7. Kocagil, Ahmet E. & Topyan, Kudret, 1997. "An empirical note on demand for speculation and futures risk premium: A Kalman Filter application," Review of Financial Economics, Elsevier, vol. 6(1), pages 77-93.
    8. Martin T. Bohl & Alexander Pütz & Pierre L. Siklos & Christoph Sulewski, 2018. "Information Transmission under Increasing Political Tension – Evidence for the Berlin Produce Exchange 1887-1896," CQE Working Papers 7618, Center for Quantitative Economics (CQE), University of Muenster.
    9. Sophie van Huellen, 2020. "Approaches To Price Formation In Financialized Commodity Markets," Journal of Economic Surveys, Wiley Blackwell, vol. 34(1), pages 219-237, February.
    10. Berck, Peter, 1980. "Portfolio Theory and the Demand for Futures: theory and the case of California cotton," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt58j4t4qp, Department of Agricultural & Resource Economics, UC Berkeley.
    11. James D. Hamilton & Jing Cynthia Wu, 2015. "Effects Of Index‐Fund Investing On Commodity Futures Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(1), pages 187-205, February.
    12. Constantino Hevia & Ivan Petrella & Martin Sola, 2018. "Risk premia and seasonality in commodity futures," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 33(6), pages 853-873, September.
    13. Berck, Peter & Cecchetti, Stephen G., 1980. "The Consumer'S Use Of Futures," 1980 Annual Meeting, July 27-30, Urbana-Champaign, Illinois 278903, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Miffre, Joëlle, 2016. "Long-short commodity investing: A review of the literature," Journal of Commodity Markets, Elsevier, vol. 1(1), pages 3-13.
    15. Nicole M. Moran & Scott H. Irwin & Philip Garcia, 2020. "Who Wins and Who Loses? Trader Returns and Risk Premiums in Agricultural Futures Markets," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(4), pages 611-652, December.
    16. Fernandez-Perez, Adrian & Fuertes, Ana-Maria & Miffre, Joëlle, 2016. "Is idiosyncratic volatility priced in commodity futures markets?," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 219-226.
    17. Tomek, William G. & Robinson, Kenneth L., 1977. "PART V. Agricultural Price Analysis and Outlook," AAEA Monographs, Agricultural and Applied Economics Association, number 337217.
    18. John Hua Fan & Adrian Fernandez‐Perez & Ana‐Maria Fuertes & Joëlle Miffre, 2020. "Speculative pressure," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(4), pages 575-597, April.
    19. Rad, Hossein & Low, Rand Kwong Yew & Miffre, Joëlle & Faff, Robert, 2020. "Does sophistication of the weighting scheme enhance the performance of long-short commodity portfolios?," Journal of Empirical Finance, Elsevier, vol. 58(C), pages 164-180.
    20. Daskalaki, Charoula & Kostakis, Alexandros & Skiadopoulos, George, 2014. "Are there common factors in individual commodity futures returns?," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 346-363.

    More about this item

    Keywords

    Risk and Uncertainty;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:ucbecw:37852. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/dabrkus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.