Asset Pricing in Created Markets

Richard Newell, Kerry Papps and James Sanchirico ()

American Journal of Agricultural Economics, 2007, vol. 89, issue 2, 259-272

Abstract: We investigate the applicability of the present-value asset pricing model to fishing quota markets by applying instrumental variable panel data estimation techniques to 15 years of market transactions from New Zealand's individual transferable quota (ITQ) market. In addition to the influence of current fishing rents, we explore the effect of market interest rates, risk, and expected changes in future rents on quota asset prices. The results indicate that quota asset prices are positively related to declines in interest rates, lower levels of risk, expected increases in future fish prices, and expected cost reductions from rationalization under the quota system. Copyright 2007, Oxford University Press.

Date: 2007
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