Semester of Graduation

Fall 2023


Master of Science (MS)


Agricultural Economics and Agribusiness

Document Type



Investing in farmland has evolved from the traditional ownership of farmland for farming to alternatives such as direct farmland purchases for rental income, farmland real estate investment trusts (Farmland REITs), investing in farmland stocks, mutual funds, ETFs, and crowdfunding platforms. This study analyzes the dynamic relationship between physical farmland values, farmland derivative prices, and the S&P 500 using annual data from 1970 to 2021. Cointegration methods are used to analyze dynamics and the capital asset pricing model (CAPM) and Sharpe ratios to measure risk-return properties of farmland assets. It is found that real farmland values, derivatives prices, and the S&P 500 are integrated of order 1 based on the Augmented Dickey-Fuller tests. Cointegration is found in some but not all pairs of variables. More specifically, Illinois farmland values and the Chicago farmland index are cointegrated with the S&P 500, implying causality in at least one direction. Farmland values for the United States, Mississippi, and Missouri farmland are not cointegrated, but Granger-cause the S&P 500. Also, a causal effect is found from the S&P 500 to Illinois farmland values and to the Chicago farmland index when cointegration is found. When analyzing returns-risk, the CAPM model results are in consistency with previous research (e.g., Barry 1980; Painter 2015; and Noumir 2022), in terms almost no risk premiums in farmland asset returns relative to the S&P 500 and values of systematic risk (beta) surrounding zero; for Louisiana and Mississippi, the beta values were negative. Sharpe ratios for the entire period were also small but show some compensation for taking risk in farmland investing on a decade-by-decade analysis, suggesting risk sensitivity to the investment horizon.



Committee Chair

Hector O. Zapata