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Time-Varying Risk Premiums in the Framework of Wine Investment*

Published online by Cambridge University Press:  04 November 2016

Eric Le Fur ,
Hachmi Ben Ameur  and
Benoit Faye
Eric Le Fur*
Affiliation:
Institut des Hautes Etudes Economiques et Commerciales (INSEEC) Business School, H19, Quai de Bacalan, CS 600083, 33070 Bordeaux, Cedex, France; University of Bordeaux; Bordeaux Wine Economists
Hachmi Ben Ameur
Affiliation:
INSEEC Business School, 27 avenue Vellefaux, 75010 Paris Cedex, France; e-mail: [email protected].
Benoit Faye
Affiliation:
INSEEC Business School, H19, Quai de Bacalan, CS 600083, 33070 Bordeaux, Cedex, France; University of Bordeaux; Bordeaux Wine Economist; e-mail: [email protected].
*
e-mail: [email protected] (corresponding author).
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Abstract

This article examines the time-varying risk premium with reference to investments in fine wines. Unlike previous studies, our article focuses on this issue within the context of the financial crisis. To do this, we propose the use of a conditional capital asset pricing model and a multivariate generalized autoregressive conditional heteroskedasticity model on several appellation wines worldwide. We find that Bordeaux fine wines were more volatile during the financial crisis and are less volatile in non-crisis periods. In addition, while the volatility of Burgundy wines is second only to Bordeaux wines, non-French fine wines (Australia, Italy, and USA) exhibit inverse volatility trends to French fine wines. (JEL Classifications: C50, G01, G11, Q13)

Keywords

betasDCC-GARCHfine winesLiv-exrisk premium
Type
Articles
Information
Journal of Wine Economics , Volume 11 , Issue 3 , December 2016 , pp. 355 - 378
Copyright
Copyright © American Association of Wine Economists 2016 

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Footnotes

*

We thank an anonymous referee for his/her comments that helped to improve the paper. All remaining errors are ours. We also thank London International Vintners Exchange (Liv-ex) for providing us with the detailed index data.

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