Agricultural and Biological Sciences
4 years ago

Farmers in New Zealand could reduce risk by investing in financial assets.

RePEc: Research Papers in Economics
Should Farmers Invest in Financial Assets as a Risk Management Strategy? Some Evidence from New Zealand
Gilbert V. Nartea, Juan M. Pellegrino, Paul Webster

Paper Summary

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Farmers in New Zealand don't often invest off the farm to manage risks. A study looked at how adding financial investments like stocks and bonds could help reduce risk for farmers. The results showed that including these investments in farm portfolios could lower risk because they have different returns than farm assets. However, farmers are unlikely to use this strategy just to stabilize their incomes. Changes in the New Zealand economy in the 1980s didn't really affect how farmers should invest their money.