A Price Index Insurance Strategy for Wheat and Corn Based on Boosted-HP Filter

Index extraction of crop price has become a complex and vital issue in agricultural insurance, especially for corn and wheat, because they are both major crops in a country. Generally, this problem is concerned with several stakeholders, including farmers and insurance companies. Suffered from the impact of the inaccurate index, several algorithms have been used to get the trend, and Hodrick-Prescott (HP) filter is one of the most widely used econometric methods. However, recent research has shown that HP may not be adequate in obtaining trends, particularly stochastic trends. Therefore, a Boosted-HP filter model (BHP filter) was proposed in this paper to do index extraction for corn and wheat. To further verify this model, this process was also implemented by HP filter in comparison. Results indicated that BHP filter both had a better performance with ${R}^{2}$ and OLS coefficient.