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Systematic and Nonsystematic Risk in Farm Portfolio Selection
Author(s) -
Turvey Calum G.,
Driver H. C.,
Baker Timothy G.
Publication year - 1988
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1241924
Subject(s) - quadratic programming , portfolio , selection (genetic algorithm) , index (typography) , covariance , variance (accounting) , quadratic equation , econometrics , linear programming , modern portfolio theory , quadratic model , mathematics , portfolio optimization , statistics , computer science , economics , mathematical optimization , finance , geometry , accounting , response surface methodology , artificial intelligence , world wide web
The concepts of systematic and nonsystematic risk are evaluated as risk measures in farm planning models. A diagonal quadratic programming model based upon a single‐index model yields farm plans similar to the full variance‐covariance quadratic program with four of thirteen farm plans being identical. Surprisingly, a linear programming model using only systematic risk produces farm plans that are identical to the full variance‐covariance quadratic program for eleven of thirteen income levels. Accordingly, it is suggested that single‐index‐based programming models may prove to be practical alternatives for deriving mean‐variance‐efficient farm plans.