MEAN-VARIANCE VERSUS MEAN–EXPECTED SHORTFALL MODELS: AN APPLICATION TO WHEAT VARIETY SELECTION
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© The Author(s) 2016. One of the most popular risk management strategies for wheat producers is varietal diversification. Previous studies proposed a mean-variance model as a tool to optimally select wheat varieties. However, this study suggests that the mean-expected shortfall (ES) model (which is based on a downside risk measure) may be a better tool because variance is not a correct risk measure when the distribution of wheat variety yields is multivariate nonnormal. Results based on data from Texas Blacklands confirm our conjecture that the mean-ES framework performs better in term of selecting wheat varieties than the mean-variance method.
author list (cited authors)
SUKCHAROEN, K., & LEATHAM, D.