Pricing commercial timberland returns in the united states

Abstract

Commercial timberland assets have attracted more attention in recent decades.One unique feature of this asset class roots in the biological growth, which is independent of traditional financial markets. Using both parametric and nonparametric approaches, we evaluate private- and public-equity timberland investments in the United States. Private-equity timberland returns are proxied by the NCREIF Timberland Index, whereas public-equity timberland returns are proxied by the value-weighted returns on a dynamic portfolio ofthe US publicly traded forestry firms that had or have been managing timberlands. The results from parametric analysis reveal that private-equity timberland investments outperform the market and have low systematic risk, whereas public-equity timberland investments fare similarly as the market. The nonparametric stochastic discount factor analyses reveal that both private- and public-equity timberland assets have higher excess returns.