The Dynamic Behavior of Efficient Timber Prices

A simple theoreticalmodel of a tim- consist ing of Faustmann rotations evalubermarket finds that there exists a rational expecta- ated at the mean of the price process. tions equilibrium in which prices evolve according The central question addressed in this to a stationary A R (1) process.Simulations analyz e study is: what is the appropriate model of a model with a more general representation of tim- timber prices? This is an important quesber stock dynamics. Implications for the optimal tion given the prescriptive nature of the harvesting literature are: 1) market efficiency pro- timber harvesting literature3 vides little justification for random walk prices; 2) and evidence unit root tests, used in previous studies to analyz e that the form of the price process strongly the informational efficiency of timber markets, do influences the performance of a reservanot distinguish between efficient and inefficient tion price rule relative to the Faustmann markets; and 3) failure to recognize asymmetric rotation (Haight and Holmes 1991; Plandisturbances in time-series analyses of historical tinga 1998). Nonetheless, most authors aptimber prices can lead to sub-optimal harvesting pear to select the form of the price process rules.