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Is wine a good choice for investment?

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

Suggested Citation

  • Bouri, Elie & Gupta, Rangan & Wong, Wing-Keung & Zhu, Zhenzhen, 2018. "Is wine a good choice for investment?," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 171-183.
    • Handle: RePEc:eee:pacfin:v:51:y:2018:i:c:p:171-183
    DOI: 10.1016/j.pacfin.2018.07.002
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    More about this item

    Keywords

    Wine investment; Mean-variance portfolio optimization; Mean-risk criterion; Stochastic dominance; Asset classes;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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