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Farmland Investment Characteristics from a Forward-Looking Perspective: An Explanation for the "High Return/Low Risk" Paradox

Farmland Investment Characteristics from a Forward-Looking Perspective: An Explanation for the... <p>ABSTRACT:</p><p>Land values and cash rents are slow to adjust, and therefore the returns from owning farmland may be time varying and serially correlated. This article investigates a farmland portfolio&apos;s nominal and real returns from a forward-looking perspective, taking into account time-varying return and serial correlation. The results indicate that the attractive average return level observed historically can be attained only over a long investment period. The risk involved in the long investment period, however, is also substantial. As a result, in mixed-asset investment portfolios, the allocations to farmland are much lower than traditional mean-variance optimization implies. <i>(JEL Q15)</i></p> http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Land Economics University of Wisconsin Press

Farmland Investment Characteristics from a Forward-Looking Perspective: An Explanation for the "High Return/Low Risk" Paradox

Land Economics , Volume 96 (2) – Apr 8, 2020

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Publisher
University of Wisconsin Press
Copyright
Copyright by the Board of Regents of the University of Wisconsin System.
ISSN
1543-8325

Abstract

<p>ABSTRACT:</p><p>Land values and cash rents are slow to adjust, and therefore the returns from owning farmland may be time varying and serially correlated. This article investigates a farmland portfolio&apos;s nominal and real returns from a forward-looking perspective, taking into account time-varying return and serial correlation. The results indicate that the attractive average return level observed historically can be attained only over a long investment period. The risk involved in the long investment period, however, is also substantial. As a result, in mixed-asset investment portfolios, the allocations to farmland are much lower than traditional mean-variance optimization implies. <i>(JEL Q15)</i></p>

Journal

Land EconomicsUniversity of Wisconsin Press

Published: Apr 8, 2020

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