Using Portfolio Theory to Enhance Wheat Yield Stability in Low-Income Nations: An Application in the Yaqui Valley of Northwestern Mexico

This study applies portfolio theory to wheat varietal selection decisions in order to find risk-minimizing outcomes while holding historical yields constant. Potential correlation across wheat cultivar yields increases the complexity of cultivar selection decisions, with gains in one attribute (yield potential) often associated with losses in another (yield stability). Using location-specific empirical data, portfolio theory can provide producers in low-income countries a tool for developing a recommended portfolio of varieties given a desired risk-aversion level. Based on data from Mexico’s Yaqui Valley, results suggest that sowing a portfolio of wheat varieties could have lowered yield variance by 22% to 33% in Northwest Mexico.
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Nalley, Lawton Lanier; Barkley, Andrew P., Using Portfolio Theory to Enhance Wheat Yield Stability in Low-Income Nations: An Application in the Yaqui Valley of Northwestern Mexico, Journal of Agricultural and Resource Economics, Volume 35, Issue 2, August 2010, Pages 334-347

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