Journal of Forest Economics > Vol 28 > Issue 1

Futures markets and real estate public equity: Connectivity of lumber futures and Timber REITs

Sherwood Clements, Department of Economics, Finance & Legal Studies, Culverhouse College of Commerce, University of Alabama, United States, jsclements@cba.ua.edu , Alan Tidwell, Department of Accounting and Finance, Turner College of Business, Columbus State University, United States, atidwell@columbusstate.edu , Changha Jin, Department of Economics, College of Business Administration, Hanyang University, Republic of Korea, cjin@hanyang.ac.kr
 
Suggested Citation
Sherwood Clements, Alan Tidwell and Changha Jin (2017), "Futures markets and real estate public equity: Connectivity of lumber futures and Timber REITs", Journal of Forest Economics: Vol. 28: No. 1, pp 70-79. http://dx.doi.org/10.1016/j.jfe.2017.06.003

Publication Date: 0/8/2017
© 0 2017 Sherwood Clements, Alan Tidwell, Changha Jin
 
Subjects
 
Keywords
JEL Codes:C32G13Q23R32
Lumber futuresSpot pricesTimber REITsCapitalization rates
 

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In this article:
Introduction 
Literature review and theoretical foundation 
Data 
Econometric models 
Empirical results and discussion 
Concluding remarks 

Abstract

This paper investigates connectivity between lumber futures contracts, Timberland REITs, the FTSE NAREIT U.S. REIT index, spot prices, and timberland capitalization rates, and contributes to this tranche of research by empirically linking the price discovery process of Timberland Real Estate Investment Trusts to lumber futures. We employ VEC and GARCH models, providing evidence that lumber futures have a positive significant long- and short-run equilibrium relationship with publicly traded Timber REIT prices, connecting a specific futures commodity with its theoretically entwined real estate equity index. As such, exogenous factors that influence Timber REIT prices are documented leading to possible diversification/risk reduction strategies.

DOI:10.1016/j.jfe.2017.06.003