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Long-term event study of timber real estate investment trust conversions

Author

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  • Piao, Xiaorui
  • Mei, Bin
  • Zhang, Weiyi

Abstract

The long-term financial performance of four timber real estate investment trust (REIT) conversions in the United States is evaluated by an event study with one-, two-, and three-year event windows. Three types of benchmarks are used in gauging the abnormal returns. The first benchmark is a portfolio of firms that are closest in size and book-to-market ratio to the timber REITs, the second is a portfolio of pre-conversion timber firms, and the third is an equal-weighted timber exchange traded fund (ETF) comprised of selected forest firms. Four approaches are used to calculate abnormal returns. Buy-and-hold abnormal returns and cumulative abnormal returns measure the preliminary abnormal returns, zero-investment portfolio approach with rolling regression evaluates the market-based risk premiums, and panel data analyses capture the relative advantages of REITs over their competitors within the timber industry. On average, annualized abnormal returns of 0.5% and 8.9% are identified before and after the REIT conversions. There is no difference between variances of pre- and post-event annualized abnormal returns. Therefore, structural changes have added values to the timber firms in the long run.

Suggested Citation

  • Piao, Xiaorui & Mei, Bin & Zhang, Weiyi, 2017. "Long-term event study of timber real estate investment trust conversions," Forest Policy and Economics, Elsevier, vol. 78(C), pages 1-9.
    • Handle: RePEc:eee:forpol:v:78:y:2017:i:c:p:1-9
    DOI: 10.1016/j.forpol.2016.12.009
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    Cited by:

    1. Mei, Bin, 2019. "Timberland investments in the United States: A review and prospects," Forest Policy and Economics, Elsevier, vol. 109(C).
    2. Samitas, Aristeidis & Papathanasiou, Spyros & Koutsokostas, Drosos & Kampouris, Elias, 2022. "Are timber and water investments safe-havens? A volatility spillover approach and portfolio hedging strategies for investors," Finance Research Letters, Elsevier, vol. 47(PA).
    3. Ståle Størdal & Gudbrand Lien & Erik Trømborg, 2021. "Impacts of Infectious Disease Outbreaks on Firm Performance and Risk: The Forest Industries during the COVID-19 Pandemic," JRFM, MDPI, vol. 14(7), pages 1-13, July.

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    More about this item

    Keywords

    Benchmark selection; Economic evaluation; Forest investments; Timber industry;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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