An analysis of the impact of timberland, farmland and commercial real estate in the asset allocation decisions of institutional investors
We examine the effects of including timberland, farmland and commercial real estate in a mixed asset portfolio with stocks, government bonds and T-Bills. Using both smoothed and unsmoothed returns (as per Geltner [Geltner, D. (1993). Estimating market values from appraised values without assuming an efficient market. Journal of Real Estate Research, 8, 25-345.]) and both constrained and unconstrained allocation assumptions (as per Eichhorn, Gupta and Stubbs [Eichhorn, D., Gupta, F., & Stubbs, E. (1998). Using constraints to improve the robustness of asset allocation. Journal of Portfolio Management, Spring, 41-48.]), we employ Markowitz portfolio optimization and find widely varying allocation outcomes. However, timberland entered nearly all portfolios, accounting for large percentages in several scenarios, while farmland entered only low-risk portfolios. At lower risk levels, commercial real estate dominates the real estate allocation but as acceptable risk levels rise, timberland supplants commercial real estate as the primary component of the portfolio's real estate allocation.
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.:
- 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.
- Changyou Sun & Daowei Zhang, 2001. "Assessing the Financial Performance of Forestry-Related Investment Vehicles: Capital Asset Pricing Model vs. Arbitrage Pricing Theory," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 617-628.
- James R. Webb & Jack H. Rubens, 1988. "The Effect of Alternative Return Measures on Restricted Mixed-Asset Portfolios," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(2), pages 123-137.
- Clair H. Redmond & Frederick W. Cubbage, 1988. "Portfolio Risk and Returns from Timber Asset Investments," Land Economics, University of Wisconsin Press, vol. 64(4), pages 325-337.
- David A. Lins & Bruce J. Sherrick & Aravind Venigalla, 1992. "Institutional Portfolios: Diversification through Farmland Investment," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(4), pages 549-571.
- David M. Geltner, 1993. "Estimating Market Values from Appraised Values without Assuming an Efficient Market," Journal of Real Estate Research, American Real Estate Society, vol. 8(3), pages 325-346.
When requesting a correction, please mention this item's handle: RePEc:eee:revfin:v:18:y:2009:i:2:p:90-96. 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 references are entirely missing, you can add them using this form.