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The Importance of Financial Leverage and Risk Aversion in Risk-Management Strategy Selection

American journal of agricultural economics, 2002-11, Vol.84 (4), p.1130-1143 [Peer Reviewed Journal]

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Title:
The Importance of Financial Leverage and Risk Aversion in Risk-Management Strategy Selection
Author: Gloy, Brent A. ; Baker, Timothy G.
Subjects: Agricultural economics ; agricultural finance ; Agricultural management ; Agriculture ; Business risks ; Crop production ; Crops ; Economics ; Efficient strategies ; Finance ; Financial leverage ; Hogs ; Q120 ; Q140 ; Risk ; Risk aversion ; Risk free assets ; Risk management ; stochastic dominance ; stochastic dominance with a risk-free asset
Is Part Of: American journal of agricultural economics, 2002-11, Vol.84 (4), p.1130-1143
Description: The problem of choice among risk-management strategies is addressed with the stochastic dominance with a risk-free asset (SDRA) criteria. The SDRA criteria consider all possible combinations of the strategies and financial leverage. This allows for strategies with less business risk, less expected return, and greater leverage to dominate strategies with greater business risk and greater expected return. Results show that the inclusion of the risk-free asset significantly improves the discriminatory power of the ordinary stochastic dominance criteria for the case of risk-management strategies.
Publisher: Oxford University Press
Language: English
Identifier: ISSN: 0002-9092
EISSN: 1467-8276
DOI: 10.1111/1467-8276.00373
Source: Alma/SFX Local Collection

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