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Abstract
In this short paper I analyse the development of returns to forest land in
Denmark for the period 1947 to 2007. The data used are fairly unique time
series of forest enterprises annual accounts in combination with property
value assessments over the entire period. They allow for a dissection of
returns into operational returns and capital gains. I draw in previous
analyses using the capital asset pricing model to assess the co-variation of
returns in Danish forestry with returns from the market portfolio, as
represented by the major financial asset groups representing the bulk of that.
I compare the development in returns and notably the role of the capital gain
over the period, to the likely equilibrium market return relevant for forest
enterprises. The observations raise the question if i) also the prices of forest
land in recent decades have been subject to a speculative bubble driving up
prices beyond that justified by patterns of return in forestry or ii) if the
returns to forest owners from holding a forest property is not Ill-captured by
the marketable goods derived from forestry accounts, in essence a forest
may not only be productive capital but also a consumption good.