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Abstract
We conduct models and tests to explore whether there are speculative bubbles and which factors contribute to the bubbles if there exits one. In the model, the option value is defined as the investment uncertainty value of farmland. The actual farmland market value and the farmland true value which includes the option value plus the present value are compared to determine whether there is a speculative bubble. In the test, we conduct robust regression analysis to ascertain the factors that contribute to the bubble. The result shows that there are two major speculative bubbles from 1976 to 1983 and 2003 to 2011 in the State of Iowa with the data from 1950 to 2011. The factors contributing to the bubble are corn price value, farm debt to asset ratio, direct government payment, net farm income and its percentage change, farmland market value percentage change, urban land to total land ratio and production cost.