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Forestry Projects, Modern Portfolio Theory, and Discount Rate Selection

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According to modern portfolio theory, only that portion of risk that cannot be diversified away by investors is relevant. Given this assumption, this paper illustrates that timberland investments can offer substantial risk-reduction benefits for investors holding diversified portfolios. With the opportunity for these benefits, it is found that the current required rate of return on an investment in southern timberland is less than the rate on U.S. Treasury bills. Utilizing one of the foundations of modern portfolio theory, an approach is presented for selecting a discount rate for long-term forestry projects undertaken either by individuals with diversified portfolios or by corporations with shareholders owning diversified portfolios. South J. Appl. For. 12(2):132-135
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Document Type: Journal Article

Affiliations: Lundy-Fetterman School of Business, Campbell University, Buies Creek, NC 27506

Publication date: 1988-05-01

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  • Each regional journal of applied forestry focuses on research, practice, and techniques targeted to foresters and allied professionals in specific regions of the United States and Canada. The Southern Journal of Applied Forestry covers an area from Virginia and Kentucky south to as far west as Oklahoma and east Texas.
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