Risks and uncertainties are prevalent in timber production due to the nature and length of the production process. This paper examines the volatility of timber prices and the effects of some economic uncertainties and risks such as fluctuations in timber prices and the interest rate on the economic returns of black walnut and red oak plantations. Historical patterns of timber prices for black walnut and oaks are investigated and compared with those of other timber species and stock price. The sensitivity of economic returns from black walnut and red oak plantations to changes in timber prices and the discount rate also is analyzed. Results indicate that the stumpage, sawlog, and veneer log prices for oaks are less volatile than softwood timber prices, but the veneer log price for black walnut is more volatile than that for Douglasfir. Unit root tests also irnply that timber prices for black walnut and oaks have time trends while softwood tin1ber prices do not. Moreover, black walnut plantations have higher economic returns than red oaks even though the timber price for black walnut is more volatile than that for red oaks.
- economic risk
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