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Return To Wine: A Comparison Of The Hedonic, Repeat Sales And Hybrid Approaches

  • JAMES J. FOGARTY
  • CALLUM JONES

Comparisons between the return to wine and standard financial assets are complicated in that the return to wine must be estimated from infrequent sales of heterogeneous wine brands. Wine returns can be estimated using several different approaches, and here the performance of the hedonic approach, repeat sales approach, and hybrid approach are compared using 14,102 auction sale observations for Australian wine over the period 1988 to 2000. For the data set considered the results show that the hybrid approach provides the most efficient estimates, and that the repeat sales approach provides significantly higher total return estimates than the other two approaches. The portfolio diversification benefit attributed to holding wine is then shown to vary with estimation method.

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File URL: http://hdl.handle.net/10.1111/j.1467-8454.2011.00416.x
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Article provided by Wiley Blackwell in its journal Australian Economic Papers.

Volume (Year): 50 (2011)
Issue (Month): 4 (December)
Pages: 147-156

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Handle: RePEc:bla:ausecp:v:50:y:2011:i:4:p:147-156
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  1. Callum Jones, 2010. "House Price Measurement: The Hybrid Hedonic Repeat-Sales Method," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 95-97, 03.
  2. Huberman, Gur & Kandel, Shmuel, 1987. " Mean-Variance Spanning," Journal of Finance, American Finance Association, vol. 42(4), pages 873-88, September.
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  4. Masset, Philippe & Weisskopf, Jean-Philippe, 2010. "Raise Your Glass: Wine Investment And The Financial Crisis," Working Papers 90484, American Association of Wine Economists.
  5. James Joseph Fogarty, 2006. "The return to Australian fine wine," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(4), pages 542-561, December.
  6. Case, Bradford & Quigley, John M, 1991. "The Dynamics of Real Estate Prices," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 50-58, February.
  7. Masset, Philippe & Henderson, Caroline, 2010. "Wine as an Alternative Asset Class," Journal of Wine Economics, Cambridge University Press, vol. 5(01), pages 87-118, March.
  8. Jack Triplett, 2004. "Handbook on Hedonic Indexes and Quality Adjustments in Price Indexes: Special Application to Information Technology Products," OECD Science, Technology and Industry Working Papers 2004/9, OECD Publishing.
  9. Kees Jan Van Garderen & Chandra Shah, 2002. "Exact interpretation of dummy variables in semilogarithmic equations," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 149-159, June.
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