Futures markets and real estate public equity: Connectivity of lumber futures and Timber REITs |
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| Affiliation: | 1. School of Economics and Management, Beijing Forestry University, Beijing 100083, China;2. College of Economics and Management, Nanjing Forestry University, Nanjing 210037, China;3. School of Public Administration and Policy, Renmin University of China, Beijing 100872, China;4. Forest and Nature Conservation Policy Group, Wageningen University and Research Centre, the Netherlands;5. China International Engineering Consulting Corporation, Beijing 100048, China;1. College of Economics and Management, Nanjing Forestry University, Nanjing, PR China;2. Department of Forestry, Mississippi State University, Mississippi State, MS 39762, USA |
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| Abstract: | 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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| Keywords: | Lumber futures Spot prices Timber REITs Capitalization rates |
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