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Wine as an Alternative Asset Class*

Published online by Cambridge University Press:  08 June 2012

Philippe Masset  and
Caroline Henderson
Philippe Masset
Affiliation:
Ecole hôtelière de Lausanne, Case postale 37, 1000 Lausanne 25, Switzerland, email: [email protected]
Caroline Henderson
Affiliation:
University of Lausanne, Department of Art History, email:[email protected]
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Abstract

Using a dataset that spans the period 1996 to 2007 and contains transaction prices for all reported auctions at the Chicago Wine Company, we analyze how the prices of high-end wines have evolved during this time period. The best wines according to characteristics like vintage, rating and ranking earn higher returns and tend to have a lower variance than poorer wines. Nevertheless, the different categories of wines seem to follow a rather similar trend over the long run. Wine returns are only slightly correlated with other assets and can consequently be used to reduce the risk of an equity portfolio. Wine looks even more attractive when the investor also has concerns about the skewness of his portfolio. However, the part to be invested in wine is reduced once the kurtosis is included into the analysis. Finally, it seems advisable to diversify across different wine categories as their short-run movements are partially independent of each other. First growths and wines rated as extraordinary by Robert Parker deliver the best tradeoff in terms of portfolio expected returns, variance, skewness and kurtosis for most investor preference settings under consideration. (JEL Classification: C60, G11, Q11)

Type
Articles
Information
Journal of Wine Economics , Volume 5 , Issue 1 , Spring 2010 , pp. 87 - 118
Copyright
Copyright © American Association of Wine Economists 2010

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