2011 journal of the asfmra.pdfVIP

2011 JOURNAL OF THE ASFMRA The Role of Farmland in an Investment Portfolio: Abstract Analysis of Illinois Endowment Farms The recent financial crisis has renewed interest in alternative asset By Kevin Noland, Jonathan Norvell, AFM, Nicholas D. Paulson, and Gary D. Schnitkey classes such as farmland. Previous work has shown that farmland may Introduction provide expected return premiums The chaos in the financial markets in 2008 and 2009 has led to a renewed interest in asset classes while adding little additional risk that have been overlooked by most mainstream investors. An example is that of U.S. farmland, to a diversified portfolio. However, these studies have been based on which provided stable income streams and reasonable market value stability during the recent relatively short time periods and period of volatility in the credit markets (Potkewitcz, 2009). There is a great deal of anxiety in aggregated data on farmland many quarters about the future investment performance of traditional asset classes. This has led returns. This analysis contributes to unprecedented interest in the return and risk component of farmland and in the short and to this literature using farm-level data from the University of Illinois long term influence it has on investors’ portfolios. endowment farms, providing additional evidence that farmland A number of academic studies have evaluated farmland and its investment potential (e.g., could play a favorable role within Kaplan, 1985;