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    Author(s): Bin Mei; David N. Wear; Jesse D. Henderson
    Date: 2019
    Source: Land Economics
    Publication Series: Scientific Journal (JRNL)
    Station: Southern Research Station
    PDF: Download Publication  (366.0 KB)

    Description

    We extend real options analysis of timberland investments to examine a combination of financial and biophysical risk effects on optimal investment strategies in the southeastern United States. Results show that, despite a slight downward drift in price, expected returns for loblolly pine management fall between entry and exit thresholds, indicating an optimal “hold” strategy. This is explained by an offsetting upward trend in biophysical productivity associated with climate changes across a range of modeled futures. Monte Carlo analysis indicates a small positive difference between entry and exit outcomes consistent with observed rates of expansion in timberland investments in the region.

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    Citation

    Mei, Bin; Wear, David N.; Henderson, Jesse D. 2019. Timberland investment under both financial and biophysical risk. Land Economics. 95(2): 279-291.

    Keywords

    economics, timberland, investments, loblolly pine, productivity

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