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The time-varying role of timberland in long-term, mixed-asset portfolios under the mean conditional value-at-risk framework

Publication ,  Journal Article
Restrepo, H; Zhang, W; Mei, B
Published in: Forest Policy and Economics
April 1, 2020

We investigate the time-varying role of timberland in a mixed-asset portfolio using 15-year rolling windows. Before running portfolio optimizations, we first test normality of return distributions of selected assets including private- and public-equity timberlands, private-equity commercial real estate, public REITs, S&P 500 index, short- and long-term government bonds, and long-term corporate bonds. Given that returns are not normally distributed, we use conditional value-at-risk (CVaR) in lieu of standard deviation as the risk measure and investigate optimal asset allocations under the mean-CVaR framework. Results reveal that weight on timberland in the mixed-asset portfolio does vary with time for both the lowest risk portfolio and the tangency portfolio due to its changing return-to-risk ratio and correlation with other assets. In particular, private-equity timberland asset plays a more significant role in the constrained optimal portfolios invested by 15-year closed-end funds maturing in recent years.

Duke Scholars

Published In

Forest Policy and Economics

DOI

ISSN

1389-9341

Publication Date

April 1, 2020

Volume

113

Related Subject Headings

  • Forestry
  • 1605 Policy and Administration
  • 1402 Applied Economics
  • 0705 Forestry Sciences
 

Citation

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Restrepo, H., Zhang, W., & Mei, B. (2020). The time-varying role of timberland in long-term, mixed-asset portfolios under the mean conditional value-at-risk framework. Forest Policy and Economics, 113. https://doi.org/10.1016/j.forpol.2020.102136
Restrepo, H., W. Zhang, and B. Mei. “The time-varying role of timberland in long-term, mixed-asset portfolios under the mean conditional value-at-risk framework.” Forest Policy and Economics 113 (April 1, 2020). https://doi.org/10.1016/j.forpol.2020.102136.
Restrepo, H., et al. “The time-varying role of timberland in long-term, mixed-asset portfolios under the mean conditional value-at-risk framework.” Forest Policy and Economics, vol. 113, Apr. 2020. Scopus, doi:10.1016/j.forpol.2020.102136.
Journal cover image

Published In

Forest Policy and Economics

DOI

ISSN

1389-9341

Publication Date

April 1, 2020

Volume

113

Related Subject Headings

  • Forestry
  • 1605 Policy and Administration
  • 1402 Applied Economics
  • 0705 Forestry Sciences