Timberland investment under both financial and biophysical risk

  • Authors: Mei, Bin; Wear, David N.; Henderson, Jesse D.
  • Publication Year: 2019
  • Publication Series: Scientific Journal (JRNL)
  • Source: Land Economics


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.

  • 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
  • Posted Date: August 26, 2019
  • Modified Date: October 3, 2019
  • Print Publications Are No Longer Available

    In an ongoing effort to be fiscally responsible, the Southern Research Station (SRS) will no longer produce and distribute hard copies of our publications. Many SRS publications are available at cost via the Government Printing Office (GPO). Electronic versions of publications may be downloaded, printed, and distributed.

    Publication Notes

    • This article was written and prepared by U.S. Government employees on official time, and is therefore in the public domain.
    • Our online publications are scanned and captured using Adobe Acrobat. During the capture process some typographical errors may occur. Please contact the SRS webmaster if you notice any errors which make this publication unusable.
    • To view this article, download the latest version of Adobe Acrobat Reader.