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A Description of Farmland Investor Expectations

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  • Tegene, Abebayehu
  • Kuchler, Frederick R

Abstract

We consider how best to characterize agricultural real estate market participants' expectation formation mechanism. The expectation formation mechanism links current agricultural policies to asset prices and tells us how current policies change expectations for future transfers. We examine behavior of real estate prices and returns using the present value model. We derive estimable equations incorporating two rival expectation formation mechanisms: rational and adaptive expectations. Assuming rational expectations, the present value model yields parameter estimates that imply the model should be rejected. Instead of rejecting the present value model while maintaining the rational expectation hypothesis, we let the data reveal which expectations hypothesis best fits this data. When we assume the rival hypothesis, the model yields parameter estimates that conform to adaptive expectation. Copyright 1991 by Kluwer Academic Publishers

Suggested Citation

  • Tegene, Abebayehu & Kuchler, Frederick R, 1991. "A Description of Farmland Investor Expectations," The Journal of Real Estate Finance and Economics, Springer, vol. 4(3), pages 283-296, September.
    • Handle: RePEc:kap:jrefec:v:4:y:1991:i:3:p:283-96
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    Cited by:

    1. Miranda, J. & Borner, J. & Kalkuhl, M. & Soares-Filho, B., 2018. "Land speculation and conservation policy leakage in Brazil," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277285, International Association of Agricultural Economists.
    2. Claassen, Roger & Tegene, Abebayehu, 1999. "Agricultural Land Use Choice: A Discrete Choice Approach," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 28(1), pages 1-11, April.
    3. Fiechter, Chad M. & Kuethe, Todd H. & Zhang, Wendong, 2022. "Information Rigidities in Farmland Value Expectations," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322070, Agricultural and Applied Economics Association.
    4. Fiechter, Chad & Kuethe, Todd, 2021. "Agricultural Lenders and Farmland Appraisers Disagreement on Farmland Value Expectations," 2021 Agricultural and Rural Finance Markets in Transition (Virtual Meeting), October 6-7, 2021 316031, Regional Research Committee NC-1177 (formerly NC-1014): Agricultural and Rural Finance Markets in Transition.
    5. Fiechter, Chad & Kuethe, Todd & Zhang, Wendong, 2023. "Information Rigidities and Farmland Value Expectations," ISU General Staff Papers 202306131414240000, Iowa State University, Department of Economics.
    6. repec:ags:aaea22:335505 is not listed on IDEAS
    7. Williams, John & McSweeney, Peter & Salmon, Robert, 2014. "Australian Farm Investment: Domestic and Overseas Issues," Papers 234408, University of Melbourne, Melbourne School of Land and Environment.
    8. Tom Engsted, 1998. "Do farmland prices reflect rationally expected future rents?," Applied Economics Letters, Taylor & Francis Journals, vol. 5(2), pages 75-79.

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