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An Analysis of the Returns from an Investment in Water Entitlements in Australia

Author/s: Henning Bjornlund, Peter Rossini

Date Published: 1/01/2007

Published in: Volume 13 - 2007 Issue 3 (pages 344 - 360)

Abstract

Using thirteen years of market data from the Goulburn-Murray Irrigation District in Victoria, Australia, cash-flow analyses are used to assess returns that investors could have achieved through an investment in water entitlements under different cash-flow management scenarios. Cycle factor analyses were conducted to determine the extent to which entitlement prices follow allocation prices. Returns from investments in water entitlements seem to be higher but more risky than investments in the share market. The movement in prices of water entitlements and allocations are reasonably synchronized, while price fluctuations of allocation prices are about twice that of water entitlements

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Keywords

Discounted Cash Flow - Time Series Analysis - Water Entitlements - Water Investment - Water Trading - Water Value

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