A trivariate vector autoregression time series process, based on a present-value land price model, is used to decompose Iowa farmland prices into fundamental and non-fundamental components. A recent study, by Falk and Lee (1998), found that non-fundamental shocks are an important source of volatility in farmland prices and it was interpreted that these price movements were due to fads not specu...

Existing models of financial market prices typically assume that investors are informed with economic data and that wealth maximization motivates them. This paper considers the social dimensions of investing and the effect that this additional motivation has on the evolution of prices in a multi-agent model of an equity market. Agents in this model represent both economically informed investors...

This paper investigates the impact of speculative trading on foreign currency markets. A review of economic literature reveals that there is still no agreement to whether speculators amplify or tame fluctuations of exchange rates. Relevant system dynamics literature suggests that trading by speculators contributes to the formation of price bubbles. However, very few system dynamics papers exist...

In this paper I investigate whether firms’ physical investments should react to the speculative overpricing of their securities. I introduce investment subject to quadratic adjustment costs (along the lines of Abel and Eberly [1994]) in an infinite horizon continuous time model with short sale constraints and heterogeneous beliefs (along the lines of Scheinkman and Xiong [2003]). Under standard...

Agricultural land prices in many developed countries rose and then fell dramatically over a relatively short period of time in the late 1970s and early 1980s. Most of the models in the literature that describe the dynamic behaviour of agricultural land prices suggest that these sharp price movements were not completely due to market fundamentals. Many attribute part of this price volatility to ...

We provide a model of rational bubbles in a DNK framework. Entrepreneurs are heterogeneous in investment efficiency and face credit constraints. They can trade bubble assets to raise their net worth. The bubble assets command a liquidity premium and can have a positive value. Monetary policy affects the conditions for the existence of a bubble, its steady-state size, and its dynamics including ...

Linear factor models, where the factors are affine processes, play a key role in Finance, since they allow for quasi-closed form expressions of term structure risks. We introduce class noncausal linear models by considering that reverse time. These especially relevant pricing sequences speculative bubbles. show feature nonaffine dynamics calendar time, while still providing (quasi) closed struc...