Is wine a good choice for investment?

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Authors

Bouri, Elie
Gupta, Rangan
Wong, Wing-Keung
Zhu, Zhenzhen

Journal Title

Journal ISSN

Volume Title

Publisher

Elsevier

Abstract

We extend our understanding on the role of wine investment within a portfolio of different assets (US/UK equities, bonds, gold, and housing) by considering a rich methodology based, among others, on the mean-variance and stochastic-dominance approaches. The main findings suggest that wine is the best investment among all individual assets under study, and investors prefer to invest in with-wine portfolios than without-wine portfolios to gain higher expected utility when short selling is not allowed. However, investors are indifferent between portfolios with and without wine when short-selling is allowed. In addition, with-wine portfolios generally either dominate individual assets or investors are indifferent in choosing between individual assets. Interestingly, the with-wine portfolios first-order stochastically dominate housing in both the long-only and short-allowed strategies, pointing towards market inefficiency. Finally, we reveal that investors prefer the low-risk with-wine portfolios to the equal-weighted portfolios but are indifferent between the high-risk with-wine portfolios and the naïve portfolios for both long-only and short-allowed strategies. Our findings can be used by investors in their investment processes, and reveal the possibility of earning abnormal returns when wine is included in the investment.

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Keywords

Wine investment, Mean-variance portfolio optimization, Mean-risk criterion, Stochastic dominance, Asset classes

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Citation

Bouri, E., Gupta, R., Wong, W.K. et al. 2018, 'Is wine a good choice for investment?', Pacific-Basin Finance Journal, vol. 51, pp. 171-183.