Evaluating the Dynamic Nature of Market Risk

This study examines the systematic risk present in major crops for the United States andthree corn-belt states. An index of commodities is used in conjunction with cash receiptsto generate dynamic estimates of the systematic risk for each crop and state. In our study,we find that beta estimates from a time varying parameter model (FLS) and OLSformulation are substantially different. From our graphs of betas over time, one gainsinsight into the changing nature of risk and the impact of institutional andmacroeconomic events. Systematic risk is shown to increase for most crops over theanalyzed period with significant changes in volatility after the collapse of the BrettonWoods Accord.