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The Impacts of Business Cycles on Returns to Farmland Investments
Author(s) -
Bjornson Bruce
Publication year - 1995
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1243225
Subject(s) - business cycle , economics , recession , boom , valuation (finance) , risk premium , systematic risk , debt , monetary economics , financial economics , finance , macroeconomics , environmental science , environmental engineering
Expected performance and valuation of investments in farmland are examined in relation to prevailing business cycle conditions over a period that includes both the 1970s farm boom and 1980s farm recession. Information on risk premia in debt, equity, and land markets are shown to significantly affect conditional expected returns to farmland and, consequently, farmland values. Further, conditional expected land returns diverge significantly in some years from returns conditionally required on the basis of systematic risk. Overall implications are that expected land returns are dependent not only on local sector conditions but also on time‐varying macroeconomic conditions related to business cycles.