A Study on the Effects of the Land Collateral to the Formation of Land Prices

Abstract

This paper examines how much the land collateral has had an effect to the formation of land prices for the last two decades.At the beginning it is showed that the value of land collateral can be regarded as default option value,and we've got its theoretical result.In the second place,the volatility needed for the estimation of default option value is estimated by generalized method of moments(GMM),and then we compare default option value with the value of land asset possessed by the firms,especially those in manufacturing industry section.In the end,we get the empirical results that the collateral value of land gives some effect to land prices,in addition to the effect of the fundamental values. keywords:the collateral value of land,fundamental values,default option value,volatility,generalized method of moments(GMM)