Vine-copula Based Models for Farmland Portfolio Management

Xiaoguang Feng and Dermot Hayes

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: U.S. farmland has achieved total returns of 10%-13% over the past decade with volatility of only 4%-5% (NCREIF Farmland Index). In addition, farmland returns have had low or negative correlation with traditional asset classes. These characteristics make farmland an attractive asset class for investors. Farmland, as a real asset, can also provide a hedge against inflation because farmland returns exhibit positive correlation with inflation. Over the past decade, annual U.S. farmland total return exceeds U.S. inflation rate by 3.55% (NCREIF Farmland Index and Consumer Price Index - Urban). With growing global demand for agricultural commodities and limited land to expand capacity, some investors expect that farmland will continue to generate superior returns for the foreseeable future.

Date: 2016-01-01
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Working Paper: Vine-Copula Based Models for Farmland Portfolio Management (2016)
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