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Fads Versus Fundamentals In Farmland Prices

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  • Barry FALK
  • Bong-Soo LEE
Abstract
This paper develops an approach to decompose farmland price time series into three components: permanent fundamental component, temporary fundamental component, and nonfundamental component. This decomposition is useful for studying the importance of fundamental versus nonfundamental factors in explaining farmland price behavior and the dynamic response of farmland price to shocks to each of these components, among other issues. The approach is applied to annual Iowa farmland prices over the 1992-1994 sample period.

Suggested Citation

  • Barry FALK & Bong-Soo LEE, 1996. "Fads Versus Fundamentals In Farmland Prices," Staff Papers 281, Iowa State University Department of Economics.
    • Handle: RePEc:isu:isuesp:281
    Note: Tables and figures are NOT included in the machine readable copy of Staff Paper 281. Contact the author for copies.
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    File URL: http://purl.umn.edu/18248
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Campbell, John Y, 1991. "A Variance Decomposition for Stock Returns," Economic Journal, Royal Economic Society, vol. 101(405), pages 157-179, March.
    3. Quah, Danny, 1992. "The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds," Econometrica, Econometric Society, vol. 60(1), pages 107-118, January.
    4. Barry Falk, 1991. "Formally Testing the Present Value Model of Farmland Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(1), pages 1-10.
    5. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
    6. Lee, Bong-Soo, 1995. "The Response of Stock Prices to Permanent and Temporary Shocks to Dividends," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(1), pages 1-22, March.
    7. Hanson, Steven D. & Myers, Robert J., 1995. "Testing for a time-varying risk premiumin the returns to U.S. farmland," Journal of Empirical Finance, Elsevier, vol. 2(3), pages 265-276, September.
    8. Falk, Barry L., 1991. "Formally Testing the Present Value Model of Farmland Prices," Staff General Research Papers Archive 11093, Iowa State University, Department of Economics.
    9. Lee, Bong-Soo, 1996. "Time-Series Implications of Aggregate Dividend Behavior," The Review of Financial Studies, Society for Financial Studies, vol. 9(2), pages 589-618.
    10. Oscar R. Burt, 1986. "Econometric Modeling of the Capitalization Formula for Farmland Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(1), pages 10-26.
    11. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
    12. Allen M. Featherstone & Timothy G. Baker, 1987. "An Examination of Farm Sector Real Asset Dynamics: 1910–85," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 532-546.
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