IDEAS home Printed from https://ideas.repec.org/a/eee/forpol/v151y2023ics1389934123000643.html
   My bibliography  Save this article

Inflation hedging effectiveness of farmland and timberland assets in the United States

Author

Listed:
  • Baral, Srijana
  • Mei, Bin

Abstract

We examine the effectiveness of private- and public-equity farmland and timberland assets in hedging actual, expected, and unexpected inflation by using the capital asset pricing model under inflation. Rolling regression is used to assess the time-varying ability of hedging inflation. Results show that private-equity farmland can hedge all inflation types with a 15-year investment horizon, whereas private- and public-equity timberland can hedge expected and unexpected inflation with 15- and 30-year investment horizons. Public-equity farmland is found to be an ineffective inflation hedge in the whole sample period (2013Q1-2021Q4). Rolling regression reveals that the financial crisis of 2008 is the cutoff period after which public-equity farmland and timberland assets become more effective inflation hedges and the ability gets stronger as the investment horizon goes beyond 10 years. Overall, results suggest that the inflation hedging effectiveness depends on the investment horizon and the state of the economy, and differs across farmland and timberland assets.

Suggested Citation

  • Baral, Srijana & Mei, Bin, 2023. "Inflation hedging effectiveness of farmland and timberland assets in the United States," Forest Policy and Economics, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:forpol:v:151:y:2023:i:c:s1389934123000643
    DOI: 10.1016/j.forpol.2023.102969
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1389934123000643
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.forpol.2023.102969?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Painter, Marvin J., 2013. "Gold, black gold, and farmland: should they all be part of your investment portfolio?," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 2(2), pages 1-13, January.
    2. Courtland L. Washburn & Clark S. Binkley, 1993. "Do Forest Assets Hedge Inflation?," Land Economics, University of Wisconsin Press, vol. 69(3), pages 215-224.
    3. Salisu, Afees A. & Raheem, Ibrahim D. & Ndako, Umar B., 2020. "The inflation hedging properties of gold, stocks and real estate: A comparative analysis," Resources Policy, Elsevier, vol. 66(C).
    4. Jack H. Rubens & Michael T. Bond & James R. Webb, 1989. "The Inflation-Hedging Effectiveness of Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 4(2), pages 45-56.
    5. Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
    6. Dangl, Thomas & Halling, Michael, 2012. "Predictive regressions with time-varying coefficients," Journal of Financial Economics, Elsevier, vol. 106(1), pages 157-181.
    7. Michael Bond & Michael Seiler, 1998. "Real Estate Returns and Inflation: An Added Variable Approach," Journal of Real Estate Research, Taylor & Francis Journals, vol. 15(3), pages 327-338, January.
    8. K.C. Chen & Daniel D. Tzang, 1988. "Interest-Rate Sensitivity of Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 3(3), pages 13-22.
    9. Parajuli, Rajan & Chang, Sun Joseph, 2015. "Real Assets and Inflation: Which Real Assets Hedge Inflation," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205283, Agricultural and Applied Economics Association.
    10. Timothy G. Baker & Michael D. Boehlje & Michael R. Langemeier, 2014. "Farmland: Is It Currently Priced as an Attractive Investment?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1321-1333.
    11. Hennings, Enrique & Sherrick, Bruce J. & Barry, Peter J., 2005. "Portfolio Diversification Using Farmland Investments," 2005 Annual meeting, July 24-27, Providence, RI 19273, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Noland, Kevin & Norvell, Jonathan & Paulson, Nicholas D. & Schnitkey, Gary D., 2011. "The Role of Farmland in an Investment Portfolio: Analysis of Illinois Endowment Farms," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2011, pages 1-42, June.
    13. Elizabeth Yobaccio & Jack H. Rubens & David C. Ketcham, 1995. "The Inflation-Hedging Properties of Risk Assets: The Case of REITs," Journal of Real Estate Research, American Real Estate Society, vol. 10(3), pages 279-296.
    14. David Hartzell & John S. Hekman & Mike E. Miles, 1987. "Real Estate Returns and Inflation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(1), pages 617-637, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wu, Shujie & Janzen, Joe, . "Understanding Farmland REITs: An Updated Price Analysis," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 13(233).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wen‐Shwo Fang & Kuan‐Min Wang & Thanh‐Binh T. Nguyen, 2008. "Is Real Estate Really an Inflation Hedge? Evidence from Taiwan," Asian Economic Journal, East Asian Economic Association, vol. 22(2), pages 209-224, June.
    2. Marc Simpson & Sanjay Ramchander & James Webb, 2007. "The Asymmetric Response of Equity REIT Returns to Inflation," The Journal of Real Estate Finance and Economics, Springer, vol. 34(4), pages 513-529, May.
    3. Arjun Chatrath & Youguo Liang, 1998. "REITs and Inflation: A Long-Run Perspective," Journal of Real Estate Research, American Real Estate Society, vol. 16(3), pages 311-326.
    4. Christou, Christina & Gupta, Rangan & Nyakabawo, Wendy & Wohar, Mark E., 2018. "Do house prices hedge inflation in the US? A quantile cointegration approach," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 15-26.
    5. Tsong-Yue Lai & Hin Man Mak & Ko Wang, 2001. "Asset Pricing Model with Short-Sale Restrictions: The Case of Asian Property Markets," International Real Estate Review, Global Social Science Institute, vol. 4(1), pages 43-56.
    6. Benedikt Fleischmann & Carsten Fritz & Steffen Sebastian, 2019. "Real Estate, Stocks, and Bonds as a Deflation Hedge," International Real Estate Review, Global Social Science Institute, vol. 22(1), pages 1-26.
    7. Wei-han Liu & Zhefang Zhou, 2009. "Inflation-hedging Behavior of a Securitized Real Estate Market," International Real Estate Review, Global Social Science Institute, vol. 12(3), pages 221-251.
    8. Bienert, Sven & Sebastian, Steffen P. & Just, Tobias, . "Niedrigzinsumfeld und die Auswirkungen auf die Immobilienwirtschaft," Beiträge zur Immobilienwirtschaft, University of Regensburg, Department of Economics, number 8, August.
    9. Arnold, Stephan & Auer, Benjamin R., 2015. "What do scientists know about inflation hedging?," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 187-214.
    10. Kuan-Min, Wang & Yuan-Ming, Lee & T.T.Binh, Nguyen, 2008. "Asymmetric Inflation Hedge of Housing Return: A Non-linear Vector Error Correction Approach," International Real Estate Review, Global Social Science Institute, vol. 11(1), pages 65-82.
    11. Martin Hoesli & Colin Lizieri & Bryan MacGregor, 2008. "The Inflation Hedging Characteristics of US and UK Investments: A Multi-Factor Error Correction Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 36(2), pages 183-206, February.
    12. Raimond Mauer & Steffen P. Sebastian, 2002. "Inflation Risk Analysis of European Real Estate Securities," Journal of Real Estate Research, American Real Estate Society, vol. 24(1), pages 47-78.
    13. Michael Bond & Michael Seiler, 1998. "Real Estate Returns and Inflation: An Added Variable Approach," Journal of Real Estate Research, Taylor & Francis Journals, vol. 15(3), pages 327-338, January.
    14. Das, Mahamitra & Sarkar, Nityananda, 2017. "Re-investigating the anomalous relationship between inflation and equity REIT returns: A regime-switching approach," MPRA Paper 95135, University Library of Munich, Germany, revised 05 Nov 2018.
    15. Taderera, Marimo & Akinsomi, Omokolade, 2020. "Is commercial real estate a good hedge against inflation? Evidence from South Africa," Research in International Business and Finance, Elsevier, vol. 51(C).
    16. Pierdzioch, Christian & Risse, Marian & Gupta, Rangan & Nyakabawo, Wendy, 2019. "On REIT returns and (un-)expected inflation: Empirical evidence based on Bayesian additive regression trees," Finance Research Letters, Elsevier, vol. 30(C), pages 160-169.
    17. Martin Hoesli & Colin Lizieri & Bryan MacGregor, 2006. "The Inflation Hedging Characteristics of US and UK Investments:Â A Multi-Factor Error Correction Approach," Real Estate & Planning Working Papers rep-wp2006-01, Henley Business School, University of Reading.
    18. Henry Koon Nam Lee, 2021. "The Inflation Hedging Effectiveness of Residential Property-Evidence from Three Emerging Asian Markets," International Real Estate Review, Global Social Science Institute, vol. 24(2), pages 221-251.
    19. Chyi Lin Lee & Ming-Long Lee, 2012. "Do European real estate stocks hedge inflation? Evidence from developed and emerging markets," ERES eres2012_155, European Real Estate Society (ERES).
    20. Dirk Brounen & Piet Eichholtz & Stefan Staetmans & Marcel Theebe, 2014. "Inflation Protection from Homeownership: Long-Run Evidence, 1814–2008," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(3), pages 662-689, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:forpol:v:151:y:2023:i:c:s1389934123000643. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/forpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.