Jensen, Farrell E.

By: Jensen, Farrell E.; Perry, Christoffer K.
This study tests for the existence of default and liquidity risk premiums in Farm Credit System bonds. ARCH models are used with over eight years of daily data on yields to maturity of Farm Credit System bonds and U.S. Treasury bonds. Matching five-year maturities for both types of bonds were used. Out data contain evidence of both default and liquidity risk in the spread between the two securities. Elasticity estimates show that the yield spreads are more responsive to default risk than liquidity risk. These sources of risk likely increase the rates agricultural borrowers must pay for loans from the Farm Credit System.
By: Jensen, Farrell E.; Pope, Rulon D.
Using panel data, the relationship between income uncertainty and the stock of wealth through precautionary saving is examined. Evidence from Kansas data is consistent with the precautionary saving motive in that farm households facing greater uncertainty in income maintain larger stocks of wealth in order to smooth consumption. These results are found by regressing net worth against measures of permanent income (life-cycle income), measures of uncertainty, and demographic variables.