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Assessing the role of U.S. timberland assets in a mixed portfolio under the mean-conditional value at risk framework

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  • Wan, Yang
  • Clutter, Michael L.
  • Mei, Bin
  • Siry, Jacek P.

Abstract

This study examines the role of U.S. timberland assets in a mixed portfolio from the risk perspective. Under the mean-conditional value at risk (M-CVaR) optimization framework, the efficient frontier of the mixed portfolio is dramatically improved after adding timberland assets in comparison of the mean-variance (M-V) efficient frontier. The asset allocation strategies formulated by the static and dynamic optimizations indicate that timberland assets maintain a significant allocation in the mixed portfolio. Moreover, risk decomposition is used to identify the risk sources under four different scenarios. It is found that large-cap stocks and small-cap stocks are generally risk intensifiers, whereas treasury bonds, treasury bills, and timberland assets are risk diversifiers.

Suggested Citation

  • Wan, Yang & Clutter, Michael L. & Mei, Bin & Siry, Jacek P., 2015. "Assessing the role of U.S. timberland assets in a mixed portfolio under the mean-conditional value at risk framework," Forest Policy and Economics, Elsevier, vol. 50(C), pages 118-126.
    • Handle: RePEc:eee:forpol:v:50:y:2015:i:c:p:118-126
    DOI: 10.1016/j.forpol.2014.06.002
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    References listed on IDEAS

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    Cited by:

    1. Busby, Gwenlyn M. & Binkley, Clark S. & Chudy, Rafal P., 2020. "Constructing optimal global timberland investment portfolios," Forest Policy and Economics, Elsevier, vol. 111(C).
    2. Mei, Bin, 2019. "Timberland investments in the United States: A review and prospects," Forest Policy and Economics, Elsevier, vol. 109(C).
    3. Dragicevic, Arnaud & Lobianco, Antonello & Leblois, Antoine, 2016. "Forest planning and productivity-risk trade-off through the Markowitz mean-variance model," Forest Policy and Economics, Elsevier, vol. 64(C), pages 25-34.
    4. Restrepo, Hector & Zhang, Weiyi & Mei, Bin, 2020. "The time-varying role of timberland in long-term, mixed-asset portfolios under the mean conditional value-at-risk framework," Forest Policy and Economics, Elsevier, vol. 113(C).
    5. Noumir, Ashraf & Langemeier, Michael, 2020. "Farmland Investment: A Portfolio Perspective," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2020.
    6. Hans Lööf & Maziar Sahamkhadam & Andreas Stephan, 2023. "Incorporating ESG into Optimal Stock Portfolios for the Global Timber & Forestry Industry," Journal of Forest Economics, now publishers, vol. 38(2), pages 133-157, June.
    7. Noumir, Ashraf & Langemeier, Michael, 2022. "Risk and return of heterogenous farmland locations and qualities," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 25(4), September.
    8. Friedrich, Stefan & Paul, Carola & Brandl, Susanne & Biber, Peter & Messerer, Katharina & Knoke, Thomas, 2019. "Economic impact of growth effects in mixed stands of Norway spruce and European beech – A simulation based study," Forest Policy and Economics, Elsevier, vol. 104(C), pages 65-80.
    9. Mei, Bin & Clutter, Michael L., 2020. "Return and information transmission of public and private timberland markets in the United States," Forest Policy and Economics, Elsevier, vol. 113(C).
    10. Kanieski da Silva, Bruno & Schons, Stella Z. & Cubbage, Frederick W. & Parajuli, Rajan, 2020. "Spatial and cross-product price linkages in the Brazilian pine timber markets," Forest Policy and Economics, Elsevier, vol. 117(C).
    11. Silva, Bruno Kanieski & Cubbage, Frederick W. & Gonzalez, Ronalds & Abt, Robert C., 2019. "Assessing market power in the U.S. pulp and paper industry," Forest Policy and Economics, Elsevier, vol. 102(C), pages 138-150.
    12. Reus, Lorenzo & Pagnoncelli, Bernardo & Armstrong, Margaret, 2019. "Better management of production incidents in mining using multistage stochastic optimization," Resources Policy, Elsevier, vol. 63(C), pages 1-1.
    13. Chudy, R.P. & Chudy, K.A. & Kanieski da Silva, B. & Cubbage, F.W. & Rubilar, R. & Lord, R., 2020. "Profitability and risk sources in global timberland investments," Forest Policy and Economics, Elsevier, vol. 111(C).

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