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

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,

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Research Papers in Economics

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Last time updated on 7/6/2012View original full text link

This paper was published in Research Papers in Economics.

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