Financial consequences of losing admixed tree species: A new approach to value increased financial risks by ungulate browsing
The influence of ungulates on the growth of young trees is amply discussed in forestry literature, particularly game browsing. Although there are a few appraisal methods that consider negative long-term influences on forest regeneration, hitherto no approach has addressed the financial consequences of lost admixed tree species. A homogenised species composition may lead to an increased financial risk of a forest. Based on financial return and risk ratios of mixed forests, this paper derives the financial compensation that would be necessary to make acceptable the increased risk of pure forest for forest owners. In this conceptual case study we consider a two-species mixed forest (Norway spruce, Picea abies [L.] Karst. and European beech, Fagus sylvatica L.) and calculate a tree species composition with maximum financial return per unit of risk. The financial indicators were generated via 1000 Monte Carlo scenarios, which consider natural hazard risks as well as timber price fluctuations. In case of an assumed reduction of European beech in different mixed forests by 30 percentage points, a compensation rate for ungulate browsing of between 16 and 23 [euro] ha-Â 1Â yr-Â 1 was estimated. Compared to the annual gains of mixed-forest between 89 and 113 [euro] ha-Â 1Â yr-Â 1 for admixtures of beech between 70 and 30 percent, we consider this amount substantial and conclude that the appraisal of game browsing effects should include the changed risk profiles between homogenised and mixed forests.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Wayne Y. Lee & Ramesh K. S. Rao, 1988. "Mean Lower Partial Moment Valuation and Lognormally Distributed Returns," Management Science, INFORMS, vol. 34(4), pages 446-453, April.
- Hildebrandt, Patrick & Knoke, Thomas, 2011. "Investment decisions under uncertainty--A methodological review on forest science studies," Forest Policy and Economics, Elsevier, vol. 13(1), pages 1-15, January.
- Post, G.T. & van Vliet, P., 2004.
"Downside Risk and Asset Pricing,"
ERIM Report Series Research in Management
ERS-2004-018-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
- Hyytiainen, Kari & Penttinen, Markku, 2008. "Applying portfolio optimisation to the harvesting decisions of non-industrial private forest owners," Forest Policy and Economics, Elsevier, vol. 10(3), pages 151-160, January.
- repec:cup:cbooks:9780521843195 is not listed on IDEAS
- Knoke, Thomas & Steinbeis, Otto-Emmanuel & Bösch, Matthias & Román-Cuesta, Rosa María & Burkhardt, Thomas, 2011. "Cost-effective compensation to avoid carbon emissions from forest loss: An approach to consider price-quantity effects and risk-aversion," Ecological Economics, Elsevier, vol. 70(6), pages 1139-1153, April.
- Dieter, Matthias, 2001. "Land expectation values for spruce and beech calculated with Monte Carlo modelling techniques," Forest Policy and Economics, Elsevier, vol. 2(2), pages 157-166, June.
- Roll, Richard, 1977. "A critique of the asset pricing theory's tests Part I: On past and potential testability of the theory," Journal of Financial Economics, Elsevier, vol. 4(2), pages 129-176, March.
- Zakamouline, Valeri & Koekebakker, Steen, 2009. "Portfolio performance evaluation with generalized Sharpe ratios: Beyond the mean and variance," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1242-1254, July.
- Jun-ya Gotoh & Hiroshi Konno, 2000. "Third Degree Stochastic Dominance and Mean-Risk Analysis," Management Science, INFORMS, vol. 46(2), pages 289-301, February.
- Gregory S. Amacher & Markku Ollikainen & Erkki A. Koskela, 2009. "Economics of Forest Resources," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012480, June.
When requesting a correction, please mention this item's handle: RePEc:eee:forpol:v:13:y:2011:i:6:p:503-511. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.