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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]
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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

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