Measuring producers' risk preferences: A global risk-attitude construct

Joost M.E. Pennings; Philip Garcia

doi:10.1111/0002-9092.00225

Measuring producers' risk preferences: A global risk-attitude construct

Joost M.E. Pennings, Philip Garcia

Agricultural and Consumer Economics

Research output: Contribution to journal › Article › peer-review

Abstract

In applied agricultural economic research various risk-attitude elicitation techniques are used. Here, we investigate whether risk-attitude measures rooted in the expected utility framework are related to measures rooted in the multi-item scale framework. Using a second-order factor analytical model, and data obtained from personal computer-guided interviews with 373 farmers, we investigate whether the common variance among the (latent) risk-attitude measures can be accounted for by a global risk-attitude construct. We find that the different risk-attitude measures are related, and that the global risk-attitude construct is significantly related to farmers' intention to use futures contracts. Our research suggests that farmers' risk attitude is a higher-order characteristic that cannot be effectively extracted by a single measure.

Original language	English (US)
Pages (from-to)	993-1009
Number of pages	17
Journal	American Journal of Agricultural Economics
Volume	83
Issue number	4
DOIs	https://doi.org/10.1111/0002-9092.00225
State	Published - 2001

Keywords

Expected utility
Futures usage
Global risk-attitude construct
Multi-item scale
Second-order factor analysis
Validity

ASJC Scopus subject areas

Agricultural and Biological Sciences (miscellaneous)
Economics and Econometrics

Online availability

10.1111/0002-9092.00225

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title = "Measuring producers' risk preferences: A global risk-attitude construct",

abstract = "In applied agricultural economic research various risk-attitude elicitation techniques are used. Here, we investigate whether risk-attitude measures rooted in the expected utility framework are related to measures rooted in the multi-item scale framework. Using a second-order factor analytical model, and data obtained from personal computer-guided interviews with 373 farmers, we investigate whether the common variance among the (latent) risk-attitude measures can be accounted for by a global risk-attitude construct. We find that the different risk-attitude measures are related, and that the global risk-attitude construct is significantly related to farmers' intention to use futures contracts. Our research suggests that farmers' risk attitude is a higher-order characteristic that cannot be effectively extracted by a single measure.",

keywords = "Expected utility, Futures usage, Global risk-attitude construct, Multi-item scale, Second-order factor analysis, Validity",

author = "Pennings, {Joost M.E.} and Philip Garcia",

note = "Funding Information: The authors are very grateful for the generous participation of the 373 farmers in our personal computer-assisted interviews. Financial support provided by the “Alg emene Stichting Termijnhandel (AST),” EURONEXT, the Chicago Mercantile Exchange, the Foundation for Research in Agricultural Derivatives, the Niels Stensen Foundation, and the Office for Futures and Options Research is gratefully acknowledged. The authors thank J.A. Bijkerk for building a user-friendly interface for the computer-assisted personal interviews. The authors express special thanks to C. Ennew, S.H. Irwin, R.M. Leuthol d, M.T.G. Meu-lenberg, A. Smidts, the AJAE editor and two anonymous reviewers who provided helpful comments on the research project and preliminary versions of the manuscript.",

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AU - Pennings, Joost M.E.

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N1 - Funding Information: The authors are very grateful for the generous participation of the 373 farmers in our personal computer-assisted interviews. Financial support provided by the “Alg emene Stichting Termijnhandel (AST),” EURONEXT, the Chicago Mercantile Exchange, the Foundation for Research in Agricultural Derivatives, the Niels Stensen Foundation, and the Office for Futures and Options Research is gratefully acknowledged. The authors thank J.A. Bijkerk for building a user-friendly interface for the computer-assisted personal interviews. The authors express special thanks to C. Ennew, S.H. Irwin, R.M. Leuthol d, M.T.G. Meu-lenberg, A. Smidts, the AJAE editor and two anonymous reviewers who provided helpful comments on the research project and preliminary versions of the manuscript.

PY - 2001

Y1 - 2001

N2 - In applied agricultural economic research various risk-attitude elicitation techniques are used. Here, we investigate whether risk-attitude measures rooted in the expected utility framework are related to measures rooted in the multi-item scale framework. Using a second-order factor analytical model, and data obtained from personal computer-guided interviews with 373 farmers, we investigate whether the common variance among the (latent) risk-attitude measures can be accounted for by a global risk-attitude construct. We find that the different risk-attitude measures are related, and that the global risk-attitude construct is significantly related to farmers' intention to use futures contracts. Our research suggests that farmers' risk attitude is a higher-order characteristic that cannot be effectively extracted by a single measure.

AB - In applied agricultural economic research various risk-attitude elicitation techniques are used. Here, we investigate whether risk-attitude measures rooted in the expected utility framework are related to measures rooted in the multi-item scale framework. Using a second-order factor analytical model, and data obtained from personal computer-guided interviews with 373 farmers, we investigate whether the common variance among the (latent) risk-attitude measures can be accounted for by a global risk-attitude construct. We find that the different risk-attitude measures are related, and that the global risk-attitude construct is significantly related to farmers' intention to use futures contracts. Our research suggests that farmers' risk attitude is a higher-order characteristic that cannot be effectively extracted by a single measure.

KW - Expected utility

KW - Futures usage

KW - Global risk-attitude construct

KW - Multi-item scale

KW - Second-order factor analysis

KW - Validity

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Measuring producers' risk preferences: A global risk-attitude construct

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