Article thumbnail

QUANTIFYING GAINS TO RISK DIVERSIFICATION USING CERTAINTY EQUIVALENCE IN A MEAN-VARIANCE MODEL: AN APPLICATION TO FLORIDA CITRUS

By Allen M. Featherstone and Charles B. Moss

Abstract

The marginal benefit and cost of diversification for Florida orange producers is analyzed using certainty equivalents. Results indicate that for moderate and high levels of risk aversion, diversification into strawberry, grapefruit, or additional orange production is not optimal. However, moderately risk averse Florida orange producers can gain by diversifying into grapefruit production if the annual amortized fixed costs can be reduced by as little as 10 percent.Risk and Uncertainty,

OAI identifier:
Downloaded from http://purl.umn.edu/30002

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.

Suggested articles

Citations

  1. (1977). Agricultural Decision Analysis.
  2. Alternative Parameter Specification in EV Analysis: Implications for Farm Level Decision Making."
  3. (1989). Budgeting Costs and Returns: Central Florida Citrus Production 1988-89." Economic Information
  4. Diversified Use of Reesources in Stabilizing Income."
  5. Interpretations and Transformations of Scale for the Pratt-Arrow Absolute Risk Aversion Coefficient: Implications for Generalized Stochastic Dominance."
  6. (1959). Portfolio Selection: Efficient Diversification of Investments.
  7. (1988). Production Costs for Selected Florida Vegetables, 1987-88." Economic Information Report 245, Food and Resource Economics Department, Agricultural Experiment Stations, Institute of Food and Agricultural Sciences,
  8. Stabilizing Farm Income by Shifting Wheat Land to Grass in the Northern Great Plains."
  9. (1988). Statistics. Citrus Summary 1987-88. Florida Agricultural Statistics Service,
  10. (1988). Statistics. Vegetable Summary 1986-87. Florida Agricultural Statistics Service,
  11. (1987). The Competitive Firm's Response to Risk,
  12. (1978). The Economic Analysis of Industrial Projects.
  13. (1956). The Introduction of Risk into a Programming Model."
  14. The Trade-Off Between Return and Risk in Farm Enterprise Choice." North Cent.