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Volatility Decay and Diversification Role of Timberland as the Investment Horizon Lengthens

Publication ,  Journal Article
Zhang, W; Mei, B
Published in: Forest Science
October 1, 2021

Under the mean-variance efficiency framework, we investigate the role of timberland asset in a mixed-Asset portfolio in the United States. Starting from a single period (quarterly) view, we first reveal the crucial role of serial correlation in defining an asset's financial performance. Accordingly, we modify return, volatility, and correlation for multiyear horizons to account for the nature of long-Term investments. Our results show that, although timberland is persistent in all portfolios, private-equity timberland can be substituted by other liquid assets, including public-equity timberland, as the lengthening holding period substantially reduces their volatilities. We conclude that private-equity timberland is a risk diversifier regardless of the length of the investment horizon, whereas public-equity timberland becomes a suitable diversifier only for long-Term investors with high risk tolerance.

Duke Scholars

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Published In

Forest Science

DOI

EISSN

1938-3738

ISSN

0015-749X

Publication Date

October 1, 2021

Volume

67

Issue

5

Start / End Page

501 / 513

Related Subject Headings

  • Forestry
  • 0705 Forestry Sciences
 

Citation

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Zhang, W., & Mei, B. (2021). Volatility Decay and Diversification Role of Timberland as the Investment Horizon Lengthens. Forest Science, 67(5), 501–513. https://doi.org/10.1093/forsci/fxab031
Zhang, W., and B. Mei. “Volatility Decay and Diversification Role of Timberland as the Investment Horizon Lengthens.” Forest Science 67, no. 5 (October 1, 2021): 501–13. https://doi.org/10.1093/forsci/fxab031.
Zhang, W., and B. Mei. “Volatility Decay and Diversification Role of Timberland as the Investment Horizon Lengthens.” Forest Science, vol. 67, no. 5, Oct. 2021, pp. 501–13. Scopus, doi:10.1093/forsci/fxab031.
Zhang W, Mei B. Volatility Decay and Diversification Role of Timberland as the Investment Horizon Lengthens. Forest Science. 2021 Oct 1;67(5):501–513.
Journal cover image

Published In

Forest Science

DOI

EISSN

1938-3738

ISSN

0015-749X

Publication Date

October 1, 2021

Volume

67

Issue

5

Start / End Page

501 / 513

Related Subject Headings

  • Forestry
  • 0705 Forestry Sciences