Browsing by Subject "timberland"

The aim of this thesis is to study the normality of Finnish privately owned timberland returns and assess the risk level under value-at-risk and conditional value-at-risk frameworks. The motivation behind the normality assumption of timberland returns is that modern portfolio theory requires the asset returns to follow a normal distribution. If the chosen assets do not follow this assumption, the modern portfolio theory is not a valid framework for the analysis. In addition, the modern portfolio theory uses variance as a risk measure, which does not consider the skewness or excess kurtosis of the asset returns. Hence, we study the return of Finnish timberland assets under value-at-risk and conditional value at-risk frameworks. The theoretical framework is based on four different value-at-risk and conditional value-at-risk estimation methods: historical, Gaussian, modified and extreme value theory based. The chosen timeframe is from January 1995 to December 2018 and the data is for six different roundwoods: logs and pulpwood of Birch, Spruce and Pine. The main finding is that the Finnish privately owned timberland returns are non-normally distributed. This is, because the return series exhibit excess kurtosis and skewness. In addition, different value-at-risk and conditional value-at-risk estimation methods give differing results due to the non-normality. Value-at-risk and conditional value-at-risk illustrate the risk of the Finnish privately owned timberland better than variance. In conclusion, the risk of the Finnish privately owned timberland is still moderate, but the normal distribution underestimates it.