Loss Aversion in Farmland Price Expectations

Abstract

Farmland price expectations play a critical role in farm investment decisions, yet previous studies suggest that market experts’ expectations are not rational. That is, market experts do not make efficient use of all available information. This article tests the degree to which expectations are consistent with rational expectations, under symmetric and asymmetric loss, based on aggregate expectations from Purdue Farmland Values and Cash Rent Survey between 1979 and 2019. We find robust evidence that farmland market experts are averse to overpredicting farmland price increases. When this asymmetry is considered, farmland market experts are shown to be rational loss minimizers.