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Agricultural Arbitrage and Risk Preferences

Author

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  • Jeffrey LaFrance
  • Rulon Pope
  • Richard Just

    (School of Economic Sciences, Washington State University)

Abstract

A structural inter-temporal model of agricultural asset arbitrage equilibrium is developed and applied to agriculture in the North-Central region of the U.S. The data is consistent with a unifying level of risk aversion. The levels of risk aversion are more plausible than previous estimates for agriculture. However, the standard arbitrage equilibrium is rejected; perhaps this is due to the period and the shortness of the period studied.

Suggested Citation

  • Jeffrey LaFrance & Rulon Pope & Richard Just, 2008. "Agricultural Arbitrage and Risk Preferences," Working Papers 2009-01, School of Economic Sciences, Washington State University.
  • Handle: RePEc:wsu:wpaper:lafrance-3
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    4. Benjamin Dequiedt & Emmanuel Servonnat, 2016. "Risk as a limit or an opportunity to mitigate GHG emissions? The case of fertilisation in agriculture," Working Papers 1606, Chaire Economie du climat.
    5. Cao, Ruixuan & Carpentier, Alain & Gohin, Alexandre, 2011. "Measuring farmers’ risk aversion: the unknown properties of the value function," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114623, European Association of Agricultural Economists.
    6. Karina Schoengold & David L. Sunding, 2014. "The impact of water price uncertainty on the adoption of precision irrigation systems," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 729-743, November.
    7. Bontemps, Christophe & Bougherara, Douadia & Nauges, Céline, 2020. "Do Risk Preferences Really Matter? The Case of Pesticide Use in Agriculture," TSE Working Papers 20-1095, Toulouse School of Economics (TSE).
    8. Philippe Bontems & Celine Nauges, 2019. "Production choices with water markets and risk aversion: the role of initial allocations and forward trading," Post-Print hal-02349932, HAL.
    9. Féménia, Fabienne & Gohin, Alexandre, 2011. "Dynamic modelling of agricultural policies: The role of expectation schemes," Economic Modelling, Elsevier, vol. 28(4), pages 1950-1958, July.
    10. Zuo, Alec & Nauges, Celine & Wheeler, Sarah, 2012. "Water trading as a risk-management tool for farmers: new empirical evidence from the Australian water market," Risk and Sustainable Management Group Working Papers 149885, University of Queensland, School of Economics.
    11. Zheng, Qiujie & Shumway, C. Richard, 2012. "Washington biofuel feedstock crop supply under output price and quantity uncertainty," Energy Policy, Elsevier, vol. 48(C), pages 515-525.
    12. Alexandre Gohin, 2019. "General Equilibrium Modelling of the Insurance Industry: U.S. Crop Insurance," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(2), pages 108-145, December.
    13. Robert G. Chambers & Daniel C. Voica, 2017. "“Decoupled” Farm Program Payments are Really Decoupled: The Theory," American Journal of Agricultural Economics, John Wiley & Sons, vol. 99(3), pages 773-782, April.
    14. Jesse Tack & Rulon Pope & Jeffrey LaFrance & Timothy Graciano & Scott Colby, 2012. "Intertemporal Risk Management in Agriculture," Monash Economics Working Papers 16-12, Monash University, Department of Economics.
    15. Zhao, Xin & Brady, Michael P. & Tozer, Peter R., 2015. "Do Farmers Really Plant Apples for Their Income and Cherries for Their Retirement? The Effects of Risk, Scope and Scale on Orchard Land Allocation," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205663, Agricultural and Applied Economics Association.
    16. Nauges, Celine & Wheeler, Sarah Ann & Zuo, Alec, 2016. "Elicitation of irrigators’ risk preferences from observed behaviour," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(3), July.
    17. Voica, Daniel C., 2017. "The Effect of the Single Farm Payment Timing on Production Incentives," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258024, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    arbitrage; risk aversion; agriculture;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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