Pricing Timberland Assets in the United States by the Arbitrage Pricing Theory

Yao, Wenjing; Mei, Bin; Clutter, Michael L.

doi:10.5849/forsci.13-023

Cited by 17 publications

(26 citation statements)

References 31 publications

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“…4 For public-equity timberland investment, 64 the value-weighted return of public timber firms (PUBLIC) is often used (e.g., Forisk Timber REIT 65 Index). Comparison of these two return series has been targeted by a few studies (e.g., Mei and Clutter 66 2010; Wan et al 2013;Yao et al 2014). However, there are some fundamental differences in how these 67 return indices are constructed and reported.…”

Section: Introduction 40mentioning

confidence: 99%

“…Wan et al 107 (2015) showed that the NTI maintained a significant allocation in the mixed portfolio under the mean-108 conditional-value-at-risk framework. Yao et al (2014) applied the arbitrage pricing theory to the NTI and 109 found that it had higher required returns as more risk factors were included. Yao and Mei (2015) claimed 110 D r a f t 6 that the excess returns of both the NTI and the PUBLIC were declining based on the intertemporal capital 111 asset pricing model.…”

Section: Introduction 40mentioning

confidence: 99%

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Investment returns of US commercial timberland: insights into index construction methods and results

Mei

2017

Can. J. For. Res.

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This study compares different index construction methods of timberland investment returns and evaluates the resulting indices by various asset pricing models. In addition to various NCRIEF indices, I include a de-smoothed index that attempts to restore property market values, a transaction-based index that tracks ex post transaction prices, and a pure-play index that is based on unleveraged returns of public timber firms and only has exposures to the timber segment. The findings are that the appraisal-based timberland index has higher mean and lower volatility compared with the transaction-based timberland index, separate accounts outperform comingled funds in the private timberland market, the pure-play timberland index exhibits higher return and lower risk than the corresponding portfolio of public timber firms, and abnormal performance of timberland asset becomes less significant after controlling for the appraisal smoothing or by using real transaction data. These results can help timberland investors better benchmark their financial performance.

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Section: Introduction 40mentioning

confidence: 99%

Section: Introduction 40mentioning

confidence: 99%

Investment returns of US commercial timberland: insights into index construction methods and results

Mei

2017

Can. J. For. Res.

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“…Liao et al (2009) investigated the financial performance of investments in timberland and timber and their correlations with nonforestry financial assets in the US. Wan et al (2013) used the Fisher hypothesis and the CAPM under inflation to analyze how effectively private and public equity timberland assets hedged actual, expected, and unexpected inflation in the US for 1987-2009. Yao et al (2014 used an intertemporal CAPM to assess the risk-return relationship between forestry-related assets in the US and innovations in state variables using quarterly returns from 1988 to 2011.…”

Section: Risk Analysismentioning

confidence: 99%

Impacts of Infectious Disease Outbreaks on Firm Performance and Risk: The Forest Industries during the COVID-19 Pandemic

Størdal

Lien

Trømborg

2021

JRFM

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We examine the financial performance of the forest products industry in the initial phase of the COVID-19 pandemic, employing data for publicly trading companies in the industry globally. We first examine the market investor reaction to the declaration of a pandemic by the World Health Organization (WHO) in March 2020 by conducting an event-study analysis. Then, we analyze medium-term changes in stock returns and their systematic risk by an econometric estimation of the capital asset pricing model. Our event-study analysis of the forest products industry shows that the forestry subsector was impacted more than the paper subsector when the WHO declared the pandemic. The effect was most prominent in North America. We find that the systematic risk for the forestry subsector tended to increase during 2020, until October. Again, this effect was most clear in North America. Conversely, the impact on the paper subsector was more stable.

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“…The positive development of the valuation of forest estates obviously has been related to an ownership change. In North America and in the Nordic Countries, forest products companies have divested forest land to institutions concentrating within the business of investing [24,25,1,2]. Recently, forestry institutions have dominated the estate market in comparison to private individuals [26,9,7].…”

Section: Introductionmentioning

confidence: 99%

“…Computational methods of financial economics have recently been applied in the analysis of forestry investments. Capital Asset Pricing Model (CAPM), as well as Arbitrage Pricing Theory (APT) have been applied [24,2]. However, private-equity timberland returns are poorly explained by CAPM [24,2], even if stumpage prices appear to support timberland returns [34].…”

Section: Introductionmentioning

confidence: 99%

Two Manifestations of Market Premium in the Capitalization of Carbon-Forest Estates

Kärenlampi¹

2022

Preprint

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The effect of capitalization premium in forest estate markets on forest management and climate change mitigation economics is investigated. It is shown that proportional goodwill in capitalization induces linear scaling of the financial return, without any contribution to sound management practices. However, there is a financial discontinuity as harvesting deteriorates goodwill. On the contrary, capitalization premium set on bare land as a tangible asset would increase timber storage and carbon sequestration. Observations indicate that the proportional goodwill is closer to reality within the Nordic Region, resulting in continuity problems but a reduced capital expense for carbon storage.

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Pricing Timberland Assets in the United States by the Arbitrage Pricing Theory

Cited by 17 publications

References 31 publications

Investment returns of US commercial timberland: insights into index construction methods and results

Investment returns of US commercial timberland: insights into index construction methods and results

Impacts of Infectious Disease Outbreaks on Firm Performance and Risk: The Forest Industries during the COVID-19 Pandemic

Two Manifestations of Market Premium in the Capitalization of Carbon-Forest Estates

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