Knoke, T.; Paul, C.; Härtl, F.; Castro, L.M.; Calvas, B. & Hildebrandt, P. (2015): <b>Optimizing agricultural land-use portfolios with scarce data—A non-stochastic model</b>. <i>Ecological Economics</i> <b>120</b>, 250-259.
Resource Description
Title:
Optimizing agricultural land-use portfolios with scarce data—A non-stochastic model
FOR816dw ID:
1418
Publication Date:
2015-10-25
License and Usage Rights:
PAK 823-825 data user agreement. (www.tropicalmountainforest.org/dataagreementp3.do)
Resource Owner(s):
Individual:
Thomas Knoke
Contact:
email:
knoke <at> forst.tu-muenchen.de
Center of Life and Food Science Weihenstephan
Institute of Forest Management
Technische Universität München
Hans-Carl-von-Carlowitz-Platz 2
85354 Freising
Germany
Individual:
Carola Paul
Contact:
email:
carola.paul <at> tum.de
Center of Life and Food Sciences Weihenstephan
Institute of Forest Management
Technische Universität München
Hans-Carl-von-Carlowitz-Platz 2
85354 Freising
Germany
Individual:
Fabian Härtl
Contact:
email:
webmaster <at> tropicalmountainforest.org
Individual:
Luz Maria Castro
Contact:
email:
luces_c <at> yahoo.es
Ecuador
Individual:
Baltazar Calvas
Contact:
email:
bcalvas <at> utpl.edu.ec
Hans-Carl-von- Carlowitz-Platz 2
Fachgebiet für Waldinventur und nachhaltige Nutzung
85354, Freising
85354 Freising
Germany
The theory of portfolio selection has often been applied to help improving decisions on the environment. The information required to apply this theory includes data on covariance of the uncertain returns between all combinations of the economic options and normally distributed returns. As it may be problematic to fulfil all data requirements and assumptions, the paper proposes a variant of robust portfolio optimization as an alternative. It considers future uncer-tainties in a non-stochastic fashion by means of possible deviations from the nominal return of land-use alternatives. The maximization of the economic return of the land-use portfolio is conditional to meeting an inclusive set of constraints. These demand that the same, whenever possible high, proportion of a required return threshold is achieved by means of the robust solution for each deviation scenario considered. The paper compares the land-use portfolios derived non-stochastically with portfolios generated by classical stochastic mean-variance op-timization. Based on data for eight agricultural crops typical for the Ecuadorian lowlands the results show that, depending on the deviation scenario assumed, the robust portfolios show a greater Shannon index compared to classical portfolios. For the same standard deviation of returns (derived through the classical sum of all covariances) the robust portfolios show no more than 2-5% loss in economic return in most cases. Occasionally, the loss has been higher, up to 20%. In this case the Shannon index was about 2.5 times higher compared with that of the conventional portfolio. The highly diverse portfolio achieved a much better protection against low relative performance. The results obtained show that the non-stochastic derivation of land-use portfolios is a good alternative to the classical stochastic model, whenever eco-nomic information is scarce.
Keywords:
| land use | diversification | sustainable land use | land use modeling | Portfolio Theory |
Literature type specific fields:
ARTICLE
Journal:
Ecological Economics
Volume:
120
Page Range:
250-259
Publisher:
Elsevier
Metadata Provider:
Individual:
Carola Paul
Contact:
email:
carola.paul <at> tum.de
Center of Life and Food Sciences Weihenstephan
Institute of Forest Management
Technische Universität München
Hans-Carl-von-Carlowitz-Platz 2
85354 Freising
Germany
