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

Xiaoguang Feng and Dermot Hayes

Land Economics, 2020, vol. 96, issue 2, 291-303

Abstract: 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’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.

JEL-codes: Q15 (search for similar items in EconPapers)
Date: 2020
Note: DOI: 10.3368/le.96.2.291
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:uwp:landec:v:96:y:2020:i:2:p:291-303

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