Skip to main content
Journal cover image

The Time-Varying Link of Public Timber REITs with Private Timberland, Real Estate, and Financial Assets

Publication ,  Journal Article
Baral, S; Mei, B
Published in: Forest Science
October 1, 2022

We examined the relationship between public timber real estate investment trusts (REIT), private timberland, real estate, and financial asset returns using a multi-factor model and investigated the time-varying volatility of timber REITs under the state space framework. We first orthogonalized explanatory variables to obtain pure factors. Then we decomposed REIT volatility into S&P500, private-equity timberland, real estate, bond, and idiosyncratic risk components. Results reveal that timber REITs are positively sensitive to large-cap stocks and bonds. Volatility contributions of the large-cap stock factor are consistent and high whereas those of idiosyncratic risk factors decline over time. Private-equity timberland, real estate, and bonds exhibit negligible contribution to the volatility of timber REITs. We conclude that timber REIT characteristics change with time and the timber REIT market is not mature. Thus, the results contribute to our understanding of the risk and return features of public-equity timberland investments. Study Implications: Forest management activities and investment rationales of timber REITs often differ from those of other forestry companies, which may affect the asset allocation decision of timber REITs as an asset class in a broad portfolio. Therefore, understanding the return dynamics and the time-varying risk decomposition of timber REITs is critical. We find that both return and risk of timber REITs are sensitive to large-cap stocks. Our analysis has implications on decision-making and risk management of public-equity timberland investments. Overall, this study improves our understanding of the financial characteristics and market maturity of timber REITs in the United States.

Duke Scholars

Published In

Forest Science

DOI

EISSN

1938-3738

ISSN

0015-749X

Publication Date

October 1, 2022

Volume

68

Issue

5-6

Start / End Page

464 / 472

Related Subject Headings

  • Forestry
  • 0705 Forestry Sciences
 

Citation

APA
Chicago
ICMJE
MLA
NLM
Baral, S., & Mei, B. (2022). The Time-Varying Link of Public Timber REITs with Private Timberland, Real Estate, and Financial Assets. Forest Science, 68(5–6), 464–472. https://doi.org/10.1093/forsci/fxac031
Baral, S., and B. Mei. “The Time-Varying Link of Public Timber REITs with Private Timberland, Real Estate, and Financial Assets.” Forest Science 68, no. 5–6 (October 1, 2022): 464–72. https://doi.org/10.1093/forsci/fxac031.
Baral, S., and B. Mei. “The Time-Varying Link of Public Timber REITs with Private Timberland, Real Estate, and Financial Assets.” Forest Science, vol. 68, no. 5–6, Oct. 2022, pp. 464–72. Scopus, doi:10.1093/forsci/fxac031.
Journal cover image

Published In

Forest Science

DOI

EISSN

1938-3738

ISSN

0015-749X

Publication Date

October 1, 2022

Volume

68

Issue

5-6

Start / End Page

464 / 472

Related Subject Headings

  • Forestry
  • 0705 Forestry Sciences