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Evaluating Farmland Investments Considering Dynamic Stochastic Returns And Farmland Prices

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  • Schnitkey, Gary D.
  • Taylor, C. Robert
  • Barry, Peter J.

Abstract

This paper examines farmland investment decisions using a stochastic dynamic programming framework. Consideration is given to the dynamic, stochastic nature of farmland returns, linkages between farmland returns and farmland prices, and the effects of the above dynamic factors on a farmÂ’s financial structure. Optimal decisions to purchase or sell farmland are found for a central Illinois farm with high quality farmland. Sizes and debt distributions are then determined, given that the optimal decision rule is followed. Decisions from the dynamic programming model also are compared to a capital budgeting model.

Suggested Citation

  • Schnitkey, Gary D. & Taylor, C. Robert & Barry, Peter J., 1989. "Evaluating Farmland Investments Considering Dynamic Stochastic Returns And Farmland Prices," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(01), July.
  • Handle: RePEc:ags:wjagec:32457
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    File URL: http://purl.umn.edu/32457
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    References listed on IDEAS

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    1. Sargan, J D & Bhargava, Alok, 1983. "Maximum Likelihood Estimation of Regression Models with First Order Moving Average Errors When the Root Lies on the Unit Circle," Econometrica, Econometric Society, vol. 51(3), pages 799-820, May.
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    Keywords

    Land Economics/Use;

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