Stochastic Dominance Portfolio Analysis of Forestry Assets

V.-P. Heikkinen and & Timo Kuosmanen
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V.-P. Heikkinen: Varma-Sampo Mutual Pension Insurance Company, Finland
& Timo Kuosmanen: Wageningen University, The Netherlands
Authors registered in the RePEc Author Service: Timo Kuosmanen

Finance from University Library of Munich, Germany

Abstract: We consider the forestry decision-making and harvesting problem from the perspective of financial portfolio management, where harvestable forest stands constitute one of the liquid assets of the portfolio. Using real data from Finnish mixed borealis forests and from the Helsinki stock exchange, we investigate the effect of trading the timber stock together with the forest land, or without the land (i.e., harvesting), on the portfolio efficiency. As our research methodology, we utilize the general Stochastic Dominance (SD) criteria, focusing on the recent theoretical advances in analyzing portfolio diversification within the SD framework. Our findings shed some further light on the question of how to model the forestry planning problem, and provide some comparative evidence of the applicability of the alternative SD test approaches.

Keywords: Forest Management; Portfolio Optimization; Stochastic Dominance; Diversification (search for similar items in EconPapers)
JEL-codes: C61 G11 Q20 Q23 (search for similar items in EconPapers)
Date: 2002-10-08
Note: Type of Document -
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0210002

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