Farm Household Livelihood Diversification Under Climate Risk in the Central Region of Cameroon: Applying Modern Portfolio Theory

Uncertainty related to climate change imposes a new economic environment on households and implies the need to seek alternate sources like livelihood diversification. It was found that to reduce their vulnerability to climate-related risks, they have to diversify their incomes by choosing a portfolio consisting of wild mango kernels and Gnetum africanum on one hand and, on the other, cassava sticks and maize. The results also unveiled that the optimal portfolio remains unchanged, regardless of the value of the risk-aversion coefficient. This study intended to equip rural farmers with the knowledge and principles of combining income-generating activities to boost their livelihoods and effectively fight against poverty. JEL Classification: G110, Q120, A540