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This study explores the potential for risk reduction by New Zealand farmers through the diversification of their farm asset portfolios to include financial investments such as ordinary industrial shares, government bonds and bank bills. Low correlations between rates of return on farm and these financial assets suggest that significant reduction of income variability might follow their inclusion in farmers’ portfolios. Stochastic efficiency analysis is used to analyse alternative portfolios of ordinary shares, government bonds and bank bills and New Zealand farmland, using coefficients of absolute risk aversion derived from a negative exponential utility function. The results suggest that those farmers showing high degrees of risk aversion would gain utility by including financial assets in their portfolios. Deregulation of the New Zealand economy in the 1980s appeared to reduce the potential gains from diversification. Bonds rather than ordinary shares are the main contributors to portfolios which maximise utility for individuals classified as ‘somewhat’ risk averse.

This paper uses the one-factor models proposed by Chan, Karolyi, Longstaff and Sanders (CKLS, 1992) to study the short-term interest rate in China. Nine stochastic models of the short-term interest rate were estimated with GMM. For the Chinese one-month inter bank loan rate, the research finds strong evidence for a mean-reverting feature in the short-term interest yield curve, but no evidence was found to indicate that the volatility is highly positively correlated with the level of interest rates. What is more, evidence was found that the CKLS model, the CIR SR model, and the Brennan-Schwartz model are correctly specified to model the Chinese short-term interest rate, so that these three models are able to adequately capture the dynamics of this interest rate. Finally, Theil’s U2 statistics and the Diebold and Mariano test were applied to explicitly evaluate the predictive power of the single factor models.

A data envelopment analysis of a sample of 76 Nepalese rice farmers reveals average relative economic, allocative, technical, pure technical and scale inefficiencies as 34, 13, 24, 18 and 7 per cent, respectively. The significant variations in the level of inefficiency across sample farms are attributed to the variations in the ‘use intensities’ of resources such as seed, labour, fertilisers and mechanical power. In addition, a second stage Tobit regression shows the variation is also related to farm‐specific attributes such as the farmers’ level of risk attitude, the farm manager's gender, age, education and family labour endowment. Based on the empirical findings, policy implications and development strategies for improving efficiency of Nepalese rice farms are briefly discussed.