Date of Award:

8-2018

Document Type:

Thesis

Degree Name:

Master of Science (MS)

Department:

Applied Economics

Advisor/Chair:

Ryan Larsen

Abstract

As intelligent investors, we should always consider holding assets of different classes. Investing in assets from various classes allows us to minimize portfolio risks. In this paper, we recommend a better way of devoting money, especially for the investors who are interested in the agricultural sector. Historically fund managers use Markowitz framework to create financial portfolios. However, that framework has some fundamental limitations. A copula is a modern approach that counters the disadvantages of the Markowitz framework, to deal with portfolio construction. Copula also identifies the downside risk (the maximum amount of money you can lose) of a portfolio.

We found that farmland is the best asset to have in an agricultural portfolio. However, farmland is scarce. So, we introduce copula, which can be used to find alternative assets. We also found that the portfolio composition does not change during agricultural boom or bust. Currently, the US agricultural sector is going through a slump period. Funds invested in a portfolio during the good seasons (given it was correctly invested) should not be altered during the bad times.

Checksum

9e322a6522e674efc9fd36acd72f61b5

Included in

Economics Commons

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