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Farmland Investment under Conditions of Certainty and Uncertainty

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  • Hardin, William G, III
  • Cheng, Ping

Abstract

This study investigates the potential for farmland to improve mixed-asset portfolio efficiency. Three major conclusions are drawn from the research. First, in a world with certainty, farmland can be shown to statistically improve mixed-asset portfolio efficiency. Second, with the introduction of uncertainty into the portfolio allocation model, investors can justify small or no allocations of farmland in a mixed-asset portfolio, although it appears that even with uncertainty prudent investors should evaluate the asset class. Third, with respect to farmland investment and geographic diversification, the results question the ability of an optimized mean-variance portfolio to provide substantial improvement in comparison to a naive portfolio. The marginal improvement in portfolio efficiency of an optimized farmland portfolio versus a naive farmland portfolio is not statistically significant. Copyright 2002 by Kluwer Academic Publishers

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  • Hardin, William G, III & Cheng, Ping, 2002. "Farmland Investment under Conditions of Certainty and Uncertainty," The Journal of Real Estate Finance and Economics, Springer, vol. 25(1), pages 81-98, July.
    • Handle: RePEc:kap:jrefec:v:25:y:2002:i:1:p:81-98
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    Cited by:

    1. Waggle, Doug & Johnson, Don T., 2009. "An analysis of the impact of timberland, farmland and commercial real estate in the asset allocation decisions of institutional investors," Review of Financial Economics, Elsevier, vol. 18(2), pages 90-96, April.
    2. 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).
    3. Doug Waggle & Don T. Johnson, 2009. "An analysis of the impact of timberland, farmland and commercial real estate in the asset allocation decisions of institutional investors," Review of Financial Economics, John Wiley & Sons, vol. 18(2), pages 90-96, April.
    4. Williams, John & McSweeney, Peter & Salmon, Robert, 2014. "Australian Farm Investment: Domestic and Overseas Issues," Papers 234408, University of Melbourne, Melbourne School of Land and Environment.
    5. Martinez-Oviedo, Raul & Medda, Francesca, 2017. "Assessing the effects of adding timberland and farmland into resource-based Sovereign Wealth Fund portfolios," Journal of Economics and Business, Elsevier, vol. 91(C), pages 24-40.
    6. 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.
    7. Johnson, Michael & O'Connor, Ian & Malcolm, Bill, 2006. "Agribusiness Assets in Investment Portfolios," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139794, Australian Agricultural and Resource Economics Society.
    8. Johnson, Michael & Malcolm, Bill & O'Connor, Ian, 2006. "The Role of Agribusiness Assets in Investment Portfolios," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 14.

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