Hostname: page-component-586b7cd67f-dsjbd Total loading time: 0 Render date: 2024-11-28T01:10:31.493Z Has data issue: false hasContentIssue false
  • English
  • Français

Wine Investment and Portfolio Diversification Gains*

Published online by Cambridge University Press:  08 June 2012

James J. Fogarty
James J. Fogarty
Affiliation:
School of Agricultural and Resource Economics, University of Western Australia, 35 Stirling Hwy, Crawley 6009, email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

The existing literature on the return to wine is mixed. Some studies have found wine to be an unattractive investment option and others have found wine to be an investment class that provides excess risk adjusted returns. However, provided the return to wine does not have a strong positive correlation with standard financial assets, even if the return to wine is low, it is possible that including wine in an investment portfolio will provide a diversification benefit. Here the repeat sales regression methodology is used to estimate the return to Australian wine, and the return is shown to be lower than for standard financial assets. Several measures are then used to show that despite the return to Australian wine being lower than the return to standard financial assets, wine does provide a modest diversification benefit. (JEL Classification: G11, G12)

Type
Articles
Information
Journal of Wine Economics , Volume 5 , Issue 1 , Spring 2010 , pp. 119 - 131
Copyright
Copyright © American Association of Wine Economists 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ashenfelter, O. and Graddy, K. (2003). Auctions and the price of art. Journal of Economic Literature, 151, 763–786.CrossRefGoogle Scholar
Ashenfelter, O., Ashmore, D. and Lalonde, R. (1995). Bordeaux wine vintage quality and the weather. Chance, 8, 7–14.CrossRefGoogle Scholar
Ashenfelter, O. (2008). Predicting the quality and prices of Bordeaux wine. The Economic Journal, 118(529), F174–184, reprinted in this issue.CrossRefGoogle Scholar
Bailey, M.J., Muth, R.F. and Nourse, H.O. (1963). A regression method for real estate price index construction. Journal of the American Statistical Association, 58, 933–942.CrossRefGoogle Scholar
Blume, M. (1984). The use of ‘alphas’ to improve performance. Journal of Portfolio Management, 11, 86–92.CrossRefGoogle Scholar
Burton, J. and Jacobsen, J.P. (2001). The rate of return on wine investment. Economic Inquiry, 39, 337–350.CrossRefGoogle Scholar
Byron, R.P. and Ashenfelter, O. (1995). Predicting the quality of an unborn grange. Economic Record, 71, 40–53.CrossRefGoogle Scholar
Caillard, A. and Langton, S. (2001). Langton's Australian fine wine buying and investment guide. Sydney: Media21.Google Scholar
Elton, E.J., Gruber, M.J. and Rentzler, J.C. (1987). Professionally managed, publicly traded commodity funds. Journal of Business, 60, 177–199.Google Scholar
Fogarty, J.J. (2006). The return to Australian fine wine. European Review of Agricultural Economics, 33, 542–561.CrossRefGoogle Scholar
Huberman, G. and Kandel, S. (1987). Mean-variance spanning. Journal of Finance, 42, 873–888.Google Scholar
Jaeger, E. (1981). To save or savor: the rate of return to storing wine: comment. Journal of Political Economy, 89, 584–592.CrossRefGoogle Scholar
Jorion, P. (1985). International portfolio diversification with estimation risk. Journal of Business, 58, 259–278.CrossRefGoogle Scholar
Krasker, W.S. (1979). The rate of return to storing wine. Journal of Political Economy, 87, 1363–1367.CrossRefGoogle Scholar
Lecocq, S. and Visser, M. (2006). Spatial variations in weather conditions and wine prices in Bordeaux. Journal of Wine Economics, 1(2), 114–124.Google Scholar
Ledoit, O. and Wolf, M. (2003). Improved estimation of the covariance matrix of stock returns with an application to portfolio selection. Journal of Empirical Finance, 10, 603–621.CrossRefGoogle Scholar
Markowitz, H. (1952). Portfolio selection. Journal of Finance, 7, 77–91.Google Scholar
Masset, P. and Henderson, C. (2010). Wine as an alternative asset class. Journal of Wine Economics, 5(1), 87–118.CrossRefGoogle Scholar
Masset, P. and Weisskopf, J. (2010). Raise your glass: wine investment and the financial crisis. American Association of Wine Economists, Working Paper No. 57.Google Scholar
Polwitoon, S. and Tawatnuntachai, O. (2008). Emerging market bond funds: a comprehensive analysis. The Financial Review, 43, 51–84.CrossRefGoogle Scholar
Rosen, S. (1974). Hedonic prices and implicit markets: product differentiation in pure competition. Journal of Political Economy, 82, 34–55.CrossRefGoogle Scholar
Sanning, L.W., Shaffer, S. and Sharratt, J.M. (2008). Bordeaux wine as a financial investment. Journal of Wine Economics, 3, 51–71.Google Scholar
Weil, R.L. (1993). Do not invest in wine, at least in the U.S., unless you plan to drink it, and maybe not even then. Paper presented at the 2nd international conference of the vineyard data quantification society: Verona.Google Scholar
Wood, D. and Anderson, K. (2006). What determines the future value of an icon wine? Journal of Wine Economics, 1(2), 141–161.Google Scholar