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Information Rigidities in Farmland Value Expectations

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  • Fiechter, Chad M.
  • Kuethe, Todd H.
  • Zhang, Wendong

Abstract

The rational expectation hypothesis posits that agents use all information efficiently in forming expectations. In farmland value expectations the hypothesis of efficient incorporation of information has been rejected. Traditionally, a rejection of rationality implies agents are irrational. However, models of information rigidity, like the Sticky and Noisy Information Models, suggest that a rational agent may face challenges in incorporating all information efficiently. We find evidence of information rigidities in the expectations of Iowa farmland values from 1964 - 2021. We also find that information rigidities do not fully explain rejections of rationality, and that the degree of information rigidity is heterogeneous for various geographic regions and during periods of high and low interest rate volatility.
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  • 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.
    • Handle: RePEc:ags:aaea22:322070
    DOI: 10.22004/ag.econ.322070
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