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A Dynamic Analysis of Land Prices
Jean-Paul Chavas and Alban Thomas
American Journal of Agricultural Economics
Vol. 81, No. 4 (Nov., 1999), pp. 772-784
Stable URL: http://www.jstor.org/stable/1244323
Page Count: 13
You can always find the topics here!Topics: Transaction costs, Agricultural land, Prices, Risk aversion, Capital asset pricing models, Financial investments, Farm economics, Economic models, Econometrics, Farms
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A dynamic model of land prices is developed. It derives arbitrage asset prices under nonadditive dynamic preferences, risk aversion, and transaction costs. The model nests as special cases risk neutrality, time-additive preferences, the static capital asset pricing model (CAPM), as well as the dynamic consumption-based CAPM. The model is applied to the analysis of U.S. land prices for the period 1950-96. The econometric results provide evidence showing that U.S. land price patterns are inconsistent with risk neutrality or with the static CAPM model. No strong evidence was found against time-additive preferences. The econometric findings indicate that both risk aversion and transaction costs have significant effects on land prices.
American Journal of Agricultural Economics © 1999 Agricultural & Applied Economics Association