Journal of Forest Economics > Vol 21 > Issue 2

Illiquidity and risk of commercial timberland assets in the United States

Bin Mei, bmei@uga.edu
 
Suggested Citation
Bin Mei (2015), "Illiquidity and risk of commercial timberland assets in the United States", Journal of Forest Economics: Vol. 21: No. 2, pp 67-78. http://dx.doi.org/10.1016/j.jfe.2015.01.003

Publication Date: 0/4/2015
© 0 2015 Bin Mei
 
Subjects
 
Keywords
JEL Codes:C22G17R32
Forest InvestmentReal estateValuationVolatility
 

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In this article:
Introduction 
Modern portfolio theory and single- vs. multi-period investment decisions 
Data 
Methods 
Results 
Discussion and conclusion 

Abstract

Using the BDS independent test and the bootstrapping method, this paper examines the relationship between return and risk of various timberland investment vehicles and the holding period. Results from the BDS test reject the null hypothesis of independent and identically distributed (i.i.d.) returns and results from the simulation indicate that the average quarterly return remains almost constant and thus independent of the holding period but the average quarterly risk (standard deviation) varies among different timberland investment vehicles. For private-equity timberland assets, the average periodic risk increases with the holding period, whereas for public-equity timberland assets, it stays relatively constant. Overall, there is some evidence that private-equity timberland returns as measured by various NCREIF timberland indices tend not to be independent and identically distributed, a violation of the key assumption for the modern portfolio theory.

DOI:10.1016/j.jfe.2015.01.003