A REGRESSION TEST OF THE PRESENT VALUE MODEL OF US FARMLAND PRICES

Abebayehu Tegene · Fred Kuchler

29 citations0/0 files storedJournal of Agricultural Economics

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Agricultural economics and policies Economics of Agriculture and Food Markets Agricultural Economics and Policy

Abstract

Regression methods previously employed to study stock price movements are used to test how well the present value model under rational expectations explains farmland price movements. Based on data on farmland prices and rents (returns to landownership) covering the period 1921‐89 from three agricultural regions in the United States, the empirical results reject the present value model under rational expectations. These results suggest that farmers may be well‐characterised as displaying satisficing rather than profit‐maximising behaviour.

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References

1980Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?1987Cointegration and Tests of Present Value Models 1980Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis 1981The Present-Value Relation: Tests Based on Implied Variance Bounds 1983Excess Volatility in the Financial Markets: A Reassessment of the Empirical Evidence 1986Econometric Modeling of the Capitalization Formula for Farmland Prices 1979Capital Gains versus Current Income in the Farming Sector 1985An Unbiased Reexamination of Stock Market Volatility

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2002Transaction Costs and the Present Value "Puzzle" of Farmland Prices 2008Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory 1997Seasonal variability, land values and willingness–to–pay for a forward wheat contract with protein premiums and discounts

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