Farmland as a portfolio investment

Kaplan, Howard

doi:10.3905/jpm.1985.408992

Cited by 50 publications

(28 citation statements)

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“…Academics and practitioners have long considered the positive correlation of farmland and associated assets with the overall price level to be an important benefit of investing in farm-related assets-see for example Kaplan [1985], Webb and Rubens [1988], and Irwin et al [1988]. While most research that brings up the relationship between the returns of farm-related assets and inf lation merely notes that there has been a historically positive relationship between farm assets and inf lation, the primary economic arguments for this to be so include:…”

Section: Inflation Hedge Ratio For Timbermentioning

confidence: 97%

The Long-Horizon Benefits of Traditional and New Real Assets in the Institutional Portfolio

Martin¹

2010

JAI

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This article addresses many of these questions as we survey and analyze the potential role of the various real asset classes listed above in reducing inf lation risk in the portfolios of long-horizon institutional investors.We propose a simple model of the evolution of asset cash f lows that can be parameterized by key variables, including: 1) sensitivity of the level of returns to expected and unexpected changes in inf lation; and 2) the degree The Journal of Alternative Investments 2010.13.1:6-29. Downloaded from www.iijournals.com by Deakin University on 08/10/15.It is illegal to make unauthorized copies of this article, forward to an unauthorized user or to post electronically without Publisher permission. r t+1 = υ + βE t [π t+1 ] + φη t+1 + ε t+1

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Section: Inflation Hedge Ratio For Timbermentioning

confidence: 97%

The Long-Horizon Benefits of Traditional and New Real Assets in the Institutional Portfolio

Martin¹

2010

JAI

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“…A number of studies have investigated the desirability of combining farmland investments with financial assets. Barry (1980), Kaplan (1985), Young and Barry (1987) and Lins et al . (1992) all found that US farmland's high return and low correlation with US stocks and bonds made it an attractive asset for investors interested in diversification.…”

Section: Introductionmentioning

confidence: 93%

Should farmers invest in financial assets as a risk management strategy? Some evidence from New Zealand*

Nartea

Webster

2008

Aus J Agri & Res Econ

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This study explores the potential for risk reduction by New Zealand farmers through the diversification of their farm asset portfolios to include financial investments such as ordinary industrial shares, government bonds and bank bills. Low correlations between rates of return on farm and these financial assets suggest that significant reduction of income variability might follow their inclusion in farmers' portfolios. Stochastic efficiency analysis is used to analyse alternative portfolios of ordinary shares, government bonds and bank bills and New Zealand farmland, using coefficients of absolute risk aversion derived from a negative exponential utility function. The results suggest that those farmers showing high degrees of risk aversion would gain utility by including financial assets in their portfolios. Deregulation of the New Zealand economy in the 1980s appeared to reduce the potential gains from diversification. Bonds rather than ordinary shares are the main contributors to portfolios which maximise utility for individuals classified as 'somewhat' risk averse.

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“…A number of studies have been completed that address the desirability of a farmland investment for nonfarmers. Kaplan (1985) measured the correlation of returns for U.S. farmland and U.S. stocks, bonds and treasury bills. He found that U.S. farm real estate was significantly correlated with treasury bills only.…”

Section: Introductionmentioning

confidence: 99%

Should Saskatchewan Farmland be Part of Your Investment Portfolio?

Painter

2000

Canadian J Agri Economics

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Farmland has been a good investment over the past 30 years, as part of an internationally diversified medium‐risk portfolio. For average or medium levels of risk, farmland can enhance the financial performance of an investment portfolio. Investors who choose to maintain a low‐risk portfolio will not include farmland and, similarly, the gains at the high‐risk level are also very minimal. The financial gains from farmland are a result of its negatively correlated returns with other equity markets. When added to an equity portfolio, the risk is reduced while maintaining the same rate of return on investment. This is especially true of the medium‐risk portfolios. Farmland investment has associated problems including illiquidity, poor marketability and asset lumpiness. A potential solution to these problems is to allow the organization of a Saskatchewan (or Canadian) farmland mutual fund. L'achat de terres agricoles s'est révélé un bon placement dans les 30 dernières années dans le cadre d'un portefeuille à risque modéré internationalement diversifié. Dans la catégorie de risque moyen ou modéré, la propriété de terres agricoles peut accroître le rendement économique d'un poriefeuille de placement. Les investisseurs qui choisissent de maintenir un poriefeuille à faible risque ne s'intéresseront pas aux terres agricoles, et par ailleurs, les gains au niveau de risque élevé sont également trés maigres. Les gains financiers tirés de la propriété de terres agricoles sont la résultante de la corrélation négative du rendement économique avec celle des autres marchés de valeurs. En ajoutant les terres agricoles à un portefeuille de valeurs mobilig̀res, on abaisse le niveau de risque tout en conservant le même taux de rendement sur les placements. C'est particulièrement vrai des portefeuilles à risque modéré. Les placements dans les terres agricoles component des inconvénients comme l'illiquidité, la difflculté de revendre et l;indivisibilité. Une solution à ces proxblèmes serait d'autoriser la constitution d'un fonds mutuel de terres agricoles, soit pour la province de Saskatchewan ou pour l'ensemble du pays.

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Farmland as a portfolio investment

Cited by 50 publications

References 2 publications

The Long-Horizon Benefits of Traditional and New Real Assets in the Institutional Portfolio

The Long-Horizon Benefits of Traditional and New Real Assets in the Institutional Portfolio

Should farmers invest in financial assets as a risk management strategy? Some evidence from New Zealand*

Should Saskatchewan Farmland be Part of Your Investment Portfolio?

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