ANALYSIS RISK AND RETURN OF CROPS PORTFOLIO
DOI:
10.54443/ijebas.v3i3.901Published:
2023-05-23Versions:
- 2023-06-10 (2)
- 2023-05-23 (1)
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Abstract
Farming is very vulnerable to risk and uncertainty. Risk in agricultural activities is one of the problem commonly faced by farmers. An alternative that can be done to minimize the risk is by diversification. The combination of two or more crops will form a portfolio that is expected to reduce the risk of farming. The purpose of this study was to analyze the income and risk of vegetable farming in a monoculture and diversification. This research was conducted using the risk analysis method using the calculation of expected return, standard deviation and coefficient variation. This research also analyze the choice of portfolio based on preference using Stochastic Efficiency With Respect To A Fuction (SERF). Research shows that diversification can reduce the risk of longbean, spinach and green mustard. Diversification also provide greater income for farmer. However, spinach will give higher return if cultivated in monoculture. Portfolio with lowest risk is portfolio IX (combination of three crop). Furthermore, farmer that are more risk averse gradually will choose portfolio that provide lower risk.
Keywords:
Risk Crop Portfolio Risk Preference SerfReferences
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