Title: The Dynamics of Opinion Formation: Panel Data Evidence from the Iowa Land Value Survey

Abstract: Opinion surveys of agricultural professionals or producers are the dominant method used by land grant universities and USDA to gauge the pulse of changes in farmland values. In lieu of the futures market for corn or Zillow-style databases for residential housing prices, these opinion surveys help market participants establish values. However, there lacks a systematic evaluation of how respondents formulate their responses to these opinion surveys and especially how they adjust their responses over time. Using a panel data of 311 agricultural professionals from the Iowa Land Value Survey from 2005 to 2015, this paper examines how these surveyed experts update their estimates of agricultural land values year over year. In particular, we examine the degree to which respondents adjust their responses to differences between their prior stated opinions and prevailing farmland prices in the last period. Using others’ median responses as a proxy for true market value and an error-correction model estimated using Bayesian methods; we provide the first micro-level empirical instigation in the formation of farmland value estimates collected through surveys of market experts. Our analysis suggests that it typically takes one or two periods for respondents to almost fully adjust to prior “errors” measured as differences between the respondent’s prior estimate and the prior prevailing price. Our results also reveal that the pace of self-correction is faster for higher quality lands, relative to lower-quality land. This difference is likely the result of greater attention paid to well-broadcasted, “high stake” auction sales for high quality lands, as well as the greater heterogeneity in productivity associated with lower-quality land. The Bayesian estimation techniques we employ in our estimation also makes an important contribution to the literature of agricultural real estate analysis by offering an easier setting to conduct inference and hypothesis testing, which is especially important with nonstationary land values.

The Dynamics of Opinion Formation: Panel Data Evidence from the Iowa Land Value Survey

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