Farmland Investment under Conditions of Certainty and Uncertainty.

This study investigates the potential for farmland to improve mixed-asset portfolio efficiency. Three major conclusions are drawn from the research. First, in a world with certainty, farmland can be shown to statistically improve mixed-asset portfolio efficiency. Second, with the introduction of uncertainty into the portfolio allocation model, investors can justify small or no allocations of farmland in a mixed-asset portfolio, although it appears that even with uncertainty prudent investors should evaluate the asset class. Third, with respect to farmland investment and geographic diversification, the results question the ability of an optimized mean-variance portfolio to provide substantial improvement in comparison to a naive portfolio. The marginal improvement in portfolio efficiency of an optimized farmland portfolio versus a naive farmland portfolio is not statistically significant. Copyright 2002 by Kluwer Academic Publishers