Title

Futures markets and real estate public equity: Connectivity of lumber futures and Timber REITs

Document Type

Article

Publication Date

8-1-2017

Publication Title

Journal of Forest Economics

Volume

28

First Page

70

Last Page

79

Keywords

Capitalization rates, Lumber futures, Spot prices, Timber REITs

Abstract

© 2017 Department of Forest Economics, Swedish University of Agricultural Sciences, Umeå This paper investigates connectivity between lumber futures contracts, Timberland REITs, the FTSE NAREIT U.S. REIT index, spot prices, and timberland capitalization rates, and contributes to this tranche of research by empirically linking the price discovery process of Timberland Real Estate Investment Trusts to lumber futures. We employ VEC and GARCH models, providing evidence that lumber futures have a positive significant long- and short-run equilibrium relationship with publicly traded Timber REIT prices, connecting a specific futures commodity with its theoretically entwined real estate equity index. As such, exogenous factors that influence Timber REIT prices are documented leading to possible diversification/risk reduction strategies.

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