IDEAS home Printed from https://ideas.repec.org/p/isu/genstf/1991010108000010566.html
   My bibliography  Save this paper

General equilibrium asset pricing model: three applications to land markets

Author

Listed:
  • Park, Cheol Soo

Abstract

Part I tests the present value model in aggregate and disaggregate land markets, based on the testable restrictions derived from the representative agent dynamic asset pricing model. The hypothesis of cointegration between land prices and rents is formulated and tested by using data on Iowa land prices and rents over the 1950-1986 sample periods. I found mixed evidence in regard to implications of the model. At the aggregate level, there exists evidence of cointegration between land prices and cashrents but not between cropshare rents and land prices. When both types of contracts are considered, there is stronger evidence of a cointegration relationship between land prices and rents. There is less evidence of cointegration at the disaggregate level. One possible explanation of the conflicting results between the aggregate and disaggregate levels is that micro bubbles from local speculation in disaggregate markets are washed out in the aggregate market;Part II investigates spatial market efficiency of land markets. The spatial land markets efficiency hypothesis implies the existence of a long run relationship between land prices in different geographical areas. Long-run equilibrium in relative land prices suggests that a cointegration relationship should exist across markets. The empirical results supported cointegration in one-half of the tests. Stronger evidence that markets have a long run equilibrium relationship was obtained in adjacent markets;Part III examines the risk-return relationships in farmland markets to establish the existence or absence of effects corresponding to the equity puzzle found in financial markets. Two measures of risk, the market beta and the consumption beta, are estimated for two contracts used in farmland markets: the cropshare contract and cashrent contract. The results reveal no significant differences in betas between the two contracts. The low beta estimates indicate that farmland contributes little systematic risk to a well-diversified asset portfolio or a consumption path.

Suggested Citation

  • Park, Cheol Soo, 1991. "General equilibrium asset pricing model: three applications to land markets," ISU General Staff Papers 1991010108000010566, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:1991010108000010566
    as

    Download full text from publisher

    File URL: https://dr.lib.iastate.edu/server/api/core/bitstreams/059943f6-e90d-4246-b046-c541f0333a4c/content
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Diba, Behzad T & Grossman, Herschel I, 1988. "The Theory of Rational Bubbles in Stock Prices," Economic Journal, Royal Economic Society, vol. 98(392), pages 746-754, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hirano, Tomohiro & Inaba, Masaru & Yanagawa, Noriyuki, 2015. "Asset bubbles and bailouts," Journal of Monetary Economics, Elsevier, vol. 76(S), pages 71-89.
    2. Uribe, Jorge & Fernández, Julián, 2014. "Burbujas financieras y comportamiento reciente de los mercados de acciones en América Latina," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 81, pages 57-90, April.
    3. Escobari, Diego & Garcia, Sergio & Mellado, Cristhian, 2017. "Identifying bubbles in Latin American equity markets: Phillips-Perron-based tests and linkages," Emerging Markets Review, Elsevier, vol. 33(C), pages 90-101.
    4. repec:hal:spmain:info:hdl:2441/74362fq3f99s299n07e84dlcib is not listed on IDEAS
    5. Horváth, Lajos & Li, Hemei & Liu, Zhenya, 2022. "How to identify the different phases of stock market bubbles statistically?," Finance Research Letters, Elsevier, vol. 46(PA).
    6. James Payne & George Waters, 2007. "Have Equity REITs Experienced Periodically Collapsing Bubbles?," The Journal of Real Estate Finance and Economics, Springer, vol. 34(2), pages 207-224, February.
    7. Areal, Francisco José & Balcombe, Kevin & Rapsomanikis, George, 2016. "Testing for bubbles in agriculture commodity markets," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 16(01), June.
    8. Pavlidis, Efthymios & Martínez-García, Enrique & Grossman, Valerie, 2019. "Detecting periods of exuberance: A look at the role of aggregation with an application to house prices," Economic Modelling, Elsevier, vol. 80(C), pages 87-102.
    9. Xie, Zixiong & Chen, Shyh-Wei & Wu, An-Chi, 2019. "Asymmetric adjustment, non-linearity and housing price bubbles: New international evidence," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    10. Chen, Shyh-Wei & Xie, Zixiong, 2017. "Asymmetric adjustment and smooth breaks in dividend yields: Evidence from international stock markets," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 339-354.
    11. Charemza, Wojciech W. & Lifshits, Mikhail & Makarova, Svetlana, 2005. "Conditional testing for unit-root bilinearity in financial time series: some theoretical and empirical results," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 63-96, January.
    12. Ralph Chami & Thomas F. Cosimano & Connel Fullenkamp, 2001. "Capital Trading, Stock Trading, and the Inflation Tax on Equity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 575-606, July.
    13. Marco Airaudo, 2017. "Complex stock price dynamics under Max Weber’s spirit of capitalism hypothesis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(1), pages 47-73, June.
    14. Karyotis, Catherine & Alijani, Sharam, 2016. "Soft commodities and the global financial crisis: Implications for the economy, resources and institutions," Research in International Business and Finance, Elsevier, vol. 37(C), pages 350-359.
    15. Verena Monschang & Bernd Wilfling, 2021. "Sup-ADF-style bubble-detection methods under test," Empirical Economics, Springer, vol. 61(1), pages 145-172, July.
    16. Pat Wilson & John Okunev & Guy Ta, 1994. "Are Real Estate and Securities Markets Integrated? Some Australian Evidence," Working Paper Series 42, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    17. Takashi Kamihigashi, 2011. "Recurrent Bubbles," The Japanese Economic Review, Japanese Economic Association, vol. 62(1), pages 27-62, March.
    18. Esteban Gómez & Sandra Rozo, 2008. "Beyond Bubbles: The Role of Asset Prices in Early-Warning Indicators," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 26(56), pages 114-148, June.
    19. Nawazish Mirza & Ayesha Afzal, 2012. "Some Preliminary Evidence on Stock Price Bubbles in an Emerging Market," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(44), pages 55-86, June.
    20. Froot, Kenneth A & Obstfeld, Maurice, 1991. "Intrinsic Bubbles: The Case of Stock Prices," American Economic Review, American Economic Association, vol. 81(5), pages 1189-1214, December.
    21. Gutierrez, Luciano, 2011. "Bootstrapping asset price bubbles," Economic Modelling, Elsevier, vol. 28(6), pages 2488-2493.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:isu:genstf:1991010108000010566. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Curtis Balmer (email available below). General contact details of provider: https://edirc.repec.org/data/deiasus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.