| Sumario: | The price diffusion model commonly used in financial economics was applied to the study of financial maturity of timber stands and forest management. The results of a lognormal diffusion of a timber price series were compared to the widely accepted fixed-price Faustmann (1849) results for financial maturity. The Faustmann rule assumes that stumpage prices are constant over time, but prices actually exhibit large variations from year to year; thus, adaptation of timber harvests in response to changing stumpage prices is an important consideration. The results of the comparison demonstrate that the prescribed rotation length is generally longer under the diffusion model; that computed stand values are higher using the price diffusion model, with the greatest divergence occurring when a stand is close to the midpoint of a rotation; and that as the stumpage price volatility increases, the gain in computed net present value increases in a nonlinear manner.
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