A pure-play timberland return index based on securitized timber firms

Based on asset values of different business segments, I derive a pure-play timberland return index using monthly data of public timber firms for the 2010-2014 period. Re- turns on public timber firms are first unleveraged and then regressed on the holding percentages of each firm' assets in timber and non-timberland business segments. The regression provides pure- play portfolios with specified long and short posi- tions in those public timber firms, with a minimum idiosyncratic volatility, that have pure exposure to the timberland business segment and eliminate all exposure to non-timberland segments. Results re- veal that this pure-play index better depicts returns on securitized timberland assets and differs signifi- cantly from various NCREIF timberland indices in mean and variance, and that returns of public- market vehicles of timberland investments tend to lead private ones for about one quarter.

Duke Scholars

Author Bin Mei Environmental Sciences and Policy