Theses and Dissertations

Issuing Body

Mississippi State University

Advisor

Harri, Ardian

Committee Member

Williams, Brian

Committee Member

Tack, Jesse

Committee Member

Riley, John Michael

Date of Degree

8-12-2016

Document Type

Graduate Thesis - Open Access

Major

Agricultural Economics

Degree Name

Master of Science (M.S.)

College

College of Agriculture and Life Sciences

Department

Department of Agricultural Economics

Abstract

This thesis investigates the use of commodity exchange traded funds (ETFs) as a price risk management tool for agriculture producers. The effectiveness of ETFs in hedging price risk will be determined by calculating optimal hedge ratios. This thesis will investigate the southeastern producer’s ability to hedge their price risk for corn, soybeans, live cattle and diesel fuel. Hedge ratios will be calculated using ordinary least squares (OLS), error correction model (ECM), and generalized autoregressive conditional heteroscedasticity (GARCH) regression models. A utility maximization framework will be used to determine how transaction costs and risk aversion effect the optimal hedge ratio. The main finding is that ETFs provide producers with a reliable tool when hedging their output and input price risk. The presence of transaction costs decrease the effectiveness of an ETF hedge.

URI

https://hdl.handle.net/11668/20947

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