Risk behavior and rational expectations in the U.S. Broiler market

Satheesh V. Aradhyula, Matthew T. Holt

Research output: Contribution to journalArticle

40 Scopus citations

Abstract

This study examines the empirical implications ofextending the rational expectations hypothesis (REH) to include price uncertainty. A general estimation framework that incorporates both the restrictions on structural parameters and the variance-covariance terms is developed. GARCH time-series processes are used to generate time-varying expectations ofboth the means and the variances ofexogenous variables. The empirical application is with a quarterly model ofthe U.S. broiler industry; the results indicate that the rational expectation ofprice variance is an important determinant of broiler supply. A formal test indicates that the restrictions implied by the REH cannot be rejected.

Original languageEnglish (US)
Pages (from-to)892-902
Number of pages11
JournalAmerican Journal of Agricultural Economics
Volume71
Issue number4
DOIs
StatePublished - Nov 1989

Keywords

  • Broiler industry
  • Expectations
  • GARCH time series models
  • Price uncertainty
  • Rational

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics

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