Assessing the financial performance of forestry-related investment vehicles: Capital asset pricing model vs. arbitrage pricing theory

Capital asset pricing model (CAPM) and arbitrage pricing theory (APT) are used to assess the financial performance of eight forestry-related investment vehicles. Although results from APT support previous findings from CAPM about timberland investments, three bodies of evidence show that APT findings are more robust. The major conclusions are (a) institutional timberland investments and timberland limited partnerships have a low risk level and excess returns; (b) forestry industry companies have not earned risk-adjusted returns, and the performance of medium forest industry firms is worse than that of large firms; (c) stumpage price does not resemble the return generation process of timberland investments; and (d) lumber futures have little excess return.