Investment in Forest Land: Aspects of Risk and Diversification

Mills, Walter L.; Hoover, William

doi:10.2307/3146075

Cited by 46 publications

(16 citation statements)

References 7 publications

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“…Economic risk is often expressed as standard deviation or variance of expected returns/net present values Knoke and Hahn 2007), but an important methodological deficiency of that approach is that positive variation is also included, while resulting damage is only a negative variation. Mills and Hoover (1982) first addressed this problem. Deegen et al (1997) use the ''my-sigma-rule'' for economic modeling of the choice of tree species under uncertain temperature trends.…”

Section: Classical Faustmann Approachmentioning

confidence: 98%

“…Attitude toward risk-time preference A general approach to extend economic models with the notion of risk is the introduction of the attitude toward risk, namely risk adversity into economic calculations (Mills and Hoover 1982;Dieter et al 2001). Knoke et al (2008: 97) show a formal way how to calculate the economic value of different forests for risk aversion.…”

Section: Monte Carlo Simulation: Portfolio Theorymentioning

confidence: 99%

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Assessing natural hazards in forestry for risk management: a review

2010

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We address the problem of how to integrate risk assessment into forest management and therefore provide a comprehensive review of recent and past literature on risk analysis and modeling and, moreover, an evaluation and summary on these papers. We provide a general scheme on how to integrate concepts of risk into forest management decisions. After an overview of the risk management process and the main hazards in forests (storm, snow, insects, fire), the paper focuses on the principal methods used to assess risks from these hazards for commercial forestry. We review mechanistic models, empirical models, and expert systems and consider the needs for different spatial scales of risk assessment, from the regional to the single-tree level. In addition to natural hazards and their secondary effects, we deal with economic aspects of risk analysis. Monte Carlo simulations to deal with volatile timber prices and ways to include risk in classical Faustmann approaches are briefly discussed along with the integration of portfolio theory into forest management decision making and attitude toward risk. Special attention is paid to the implications for risk modeling under climate change.

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Section: Classical Faustmann Approachmentioning

confidence: 98%

Section: Monte Carlo Simulation: Portfolio Theorymentioning

confidence: 99%

Assessing natural hazards in forestry for risk management: a review

2010

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“…Standing timber reduces the overall portfolio risks of well-diversified portfolios (high initial non-forest wealth) in the same way as forest land does in aggregate level studies (e.g. Mills and Hoover, 1982;Thomson, 1991;Caulfield, 1998;Lausti and Penttinen, 2006).…”

Section: Discussionmentioning

confidence: 97%

“…For example, the optimal allocation of assets tends to be sensitive to the period of historical data used to compute the returns series (e.g. Mills and Hoover, 1982), optimisation technique (Thomson and Baumgartner, 1988), and the degree of relative risk aversion (Tahvonen and Kallio, 2006;Kijima and Ohnishi, 1993). Changes in input parameters notably affect the optimisation results, and hence proper sensitivity analysis is needed in any practical application (cf.…”

Section: Discussionmentioning

confidence: 99%

“…In forestry, MPT has been employed mainly to compare investments in forest land ex post with alternative investments or markets as a whole. Mills and Hoover (1982) were the first to solve the ex ante investment problem including financial assets and farmland as alternative investments in addition to timberland. Since then, the question whether to buy or sell forest land has been investigated in several ex-post capital asset pricing model (CAPM) studies (e.g.…”

Section: Aggregate Level Planning and Controlmentioning

confidence: 99%

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