A Dynamic Analysis of Land Prices

13 Pages Posted: 31 Mar 2020

See all articles by Jean‐Paul Chavas

Jean‐Paul Chavas

University of Maryland

Alban Thomas

University of Toulouse 1 - Toulouse School of Economics (TSE); delete

Date Written: November 1999


A dynamic model of land prices is developed. It derives arbitrage asset prices under nonadditive dynamic preferences, risk aversion, and transaction costs. The model nests as special cases risk neutrality, time‐additive preferences, the static capital asset pricing model (CAPM), as well as the dynamic consumption‐based CAPM. The model is applied to the analysis of U.S. land prices for the period 1950–96. The econometric results provide evidence showing that U.S. land price patterns are inconsistent with risk neutrality or with the static CAPM model. No strong evidence was found against time‐additive preferences. The econometric findings indicate that both risk aversion and transaction costs have significant effects on land prices.

Keywords: asset pricing, land, risk, transaction cost, Q150

Suggested Citation

Chavas, Jean‐Paul and Thomas, Alban and Thomas, Alban, A Dynamic Analysis of Land Prices (November 1999). American Journal of Agricultural Economics, Vol. 81, Issue 4, pp. 772-784, 1999, Available at SSRN: https://ssrn.com/abstract=3563159 or http://dx.doi.org/10.2307/1244323

Jean‐Paul Chavas (Contact Author)

University of Maryland

Alban Thomas


University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042

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