Investor Sentiment and Timberland Investment Returns

We use the orthogonalized investor sentiment index formed by M. Baker and J. Wurgler (J. Financ. 61(4): 1645-1680, 2006) to examine the relationship between investor sentiment and timberland investment returns. The empirical results show that current investor sentiment is an important factor that determines the one-quarter future returns of timberland investment, and the predicting power persists over the next 1 to 5 years. Both the short-and long-term studies obtain negative coefficients on investor sentiment, indicating that current increase in investor sentiment drives prices up and lowers future returns. In addition, significantly different return variances and insignificantly different average returns of timberland investment are obtained between low-and high-sentiment periods. The result further confirms the ability of earning long-term stable returns by timberland investment.