The role of farmland in a mixed asset investment portfolio

Farmland has been gaining attention from investors for its long-term return potential and diversification benefits within mixed asset investment portfolios. This analysis examines the historical performance of farmland and the future drivers for growth and assesses the role of farmland in investment portfolios. This study examines farmland returns from 1970-2020 and compares them with the S&P500, AAA bonds, and 10-year constant maturity Treasury yields. The returns to these assets are also compared with inflation as an important economic indicator. Finally, the efficient frontier using these assets is derived, and the optimal portfolio composition is determined. Sensitivity analysis related to returns measurement, volatility smoothing, and aggregation bias is presented to demonstrate the robustness of the results. Farmland’s high returns and low standard deviation contribute to an efficient portfolio of stocks, bonds, and treasuries. Even when there are shocks to returns and volatility, farmland remains a large component in efficient portfolios. The findings of this study show that adding farmland to a mixed asset investment portfolio not only provides diversification benefits but can also increase the returns for a long-term investor.

Name thesis:degree_name

M.S.

Level thesis:degree_level

Thesis

Discipline thesis:degree_discipline

Agricultural & Applied Econ

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2022

Author dc:creator

• Elmore, Ailie Carlene

Contributors dc:contributor

• Sherrick, Bruce J.

• Agriculture

Statement dc:rights

• © 2021 Ailie Carlene Elmore. All rights reserved.

Language dc:language

en, eng

Handle dc:identifier

http://hdl.handle.net/2142/113866

OAI record oai:identifier

https://www.ideals.illinois.edu/oai-pmh?verb=GetRecord&metadataPrefix=etdms&identifier=oai%3Awww.ideals.illinois.edu%3A2142%2F113866