A Hedonic Price Analysis of Farmland Option Premiums Under Urban Influences
Abstract"An emerging theory, real option pricing, suggests that an important component of urban fringe farmland values may be the option value arising from nearby urban development. This new option pricing theory, as opposed to its standard conventional counterpart in finance, incorporates both the uncertainty about the future net benefits of a land conversion decision and the irreversibility of this action taken. We demonstrate that parsimonious empirical hedonic models of the errors-in-variables type, when corrected for heteroskedasticity, can provide adequate representations of farmland option premiums. Data for a random sample of cash rented Ohio farmland parcels are used, and the impacts of urban development on farmland option premiums are estimated. Results provide evidence that (a) both land-use conversion probability and urban influences have been important factors affecting the option value of the state's farmland, and (b) these option premiums associated with irreversible and uncertain land development are capitalized into farmland values." Copyright 2006 Canadian Agricultural Economics Society.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie in its journal Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie.
Volume (Year): 54 (2006)
Issue (Month): 3 (09)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0008-3976
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Jean CavailhÃ¨s & Mohamed Hilal & Pierre Wavresky, 2011. "L'influence urbaine sur le prix des terres agricoles et ses consÃ©quences pour l'agriculture," Working Papers 49593, Institut National de la Recherche Agronomique, France.
- Forster, D. Lynn, 2006. "An Overview of U.S. Farm Real Estate Markets," Working Papers 28319, Ohio State University, Department of Agricultural, Environmental and Development Economics.
- Jean CavailhÃ‹s & Isabelle Thomas, 2011. "The influence of urban sprawl on farmland prices in Belgium (refereed paper)," ERSA conference papers ersa10p1628, European Regional Science Association.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.