IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v36y2016icp591-614.html
   My bibliography  Save this article

Wine: To drink or invest in? A study of wine as an investment asset in French portfolios

Author

Listed:
  • Aytaç, Beysül
  • Hoang, Thi-Hong-Van
  • Mandou, Cyrille

Abstract

This paper aims to assess the role of wine investments in the diversification of French portfolios. Our 2007–2014 dataset is composed of not only Liv-ex indexes but also WineDex ones. These latter are proposed by iDealwine, an online platform for wine investment in France. We also include stocks, bonds and a risk-free asset to constitute different French portfolios based on the risk-aversion degree of investors (Canner et al., 1997). Moreover, we compare wine to another important alternative asset for French investors: gold. Following the mean-variance portfolio optimization approach (Markowitz, 1952), we find that portfolios with wine are more efficient than portfolios without it. However, following the mean-modified value-at-risk portfolio optimization (Favre and Galeano, 2002), the results with Liv-ex indexes are not maintained anymore. On the other hand, we use the Sharpe (1964) and modified Sharpe (Gregoriou and Gueyie, 2003) ratios to calculate the portfolio performance. We find that in most cases, the higher the proportion of wine, the higher the portfolio performance is. In all cases, our results suggest that iDealwine indexes, particularly WineDex Bordeaux, are more profitable than Liv-ex ones. On the other hand, following the optimal weights calculated by the Kroner and Ng (1998) method, we find that the less risk-averse the investors, the more they should include wine in their portfolios. Otherwise, we find that gold does not allow improving efficient frontiers. However, it allows improving the performance of French portfolios. A robustness check on the 2001–2006 period shows that wine and gold remain profitable for portfolio diversification even before the recent crisis period but with lower impacts on the performance improvement.

Suggested Citation

  • Aytaç, Beysül & Hoang, Thi-Hong-Van & Mandou, Cyrille, 2016. "Wine: To drink or invest in? A study of wine as an investment asset in French portfolios," Research in International Business and Finance, Elsevier, vol. 36(C), pages 591-614.
  • Handle: RePEc:eee:riibaf:v:36:y:2016:i:c:p:591-614
    DOI: 10.1016/j.ribaf.2015.03.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531915000252
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
    2. Masset, Philippe & Henderson, Caroline, 2010. "Wine as an Alternative Asset Class," Journal of Wine Economics, Cambridge University Press, vol. 5(1), pages 87-118, April.
    3. Kemper, Kris & Lee, Allissa & Simkins, Betty J., 2012. "Diversification revisited," Research in International Business and Finance, Elsevier, vol. 26(2), pages 304-316.
    4. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(1), pages 122-150, February.
    5. Baur, Dirk G. & McDermott, Thomas K., 2010. "Is gold a safe haven? International evidence," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1886-1898, August.
    6. Canner, Niko & Mankiw, N Gregory & Weil, David N, 1997. "An Asset Allocation Puzzle," American Economic Review, American Economic Association, vol. 87(1), pages 181-191, March.
    7. El Hedi Arouri, Mohamed & Jouini, Jamel & Nguyen, Duc Khuong, 2011. "Volatility spillovers between oil prices and stock sector returns: Implications for portfolio management," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1387-1405.
    8. Sanning, Lee W. & Shaffer, Sherrill & Sharratt, Jo Marie, 2008. "Bordeaux Wine as a Financial Investment," Journal of Wine Economics, Cambridge University Press, vol. 3(1), pages 51-71, April.
    9. Fogarty, James J., 2010. "Wine Investment and Portfolio Diversification Gains," Journal of Wine Economics, Cambridge University Press, vol. 5(1), pages 119-131, April.
    10. Massimiliano Caporin & Grégory M. Jannin & Francesco Lisi & Bertrand B. Maillet, 2014. "A Survey On The Four Families Of Performance Measures," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 917-942, December.
    11. Morales, Lucía & Andreosso-O'Callaghan, Bernadette, 2011. "Comparative analysis on the effects of the Asian and global financial crises on precious metal markets," Research in International Business and Finance, Elsevier, vol. 25(2), pages 203-227, June.
    12. Thi Hong Van Hoang, 2010. "The Gold Market at the Paris Stock Exchange: A Risk-Return Analysis 1950-2003," Historical Social Research (Section 'Cliometrics'), Association Française de Cliométrie (AFC), vol. 35(3), pages 389-411.
    13. Krasker, William S, 1979. "The Rate of Return to Storing Wines," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1363-1367, December.
    14. Jaeger, Elizabeth, 1981. "To Save or Savor: The Rate of Return to Storing Wine: Comment," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 584-592, June.
    15. Tully, Edel & Lucey, Brian M., 2007. "A power GARCH examination of the gold market," Research in International Business and Finance, Elsevier, vol. 21(2), pages 316-325, June.
    16. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    17. Kourtis, Apostolos & Markellos, Raphael N. & Psychoyios, Dimitris, 2012. "Wine price risk management: International diversification and derivative instruments," International Review of Financial Analysis, Elsevier, vol. 22(C), pages 30-37.
    18. Storchmann, Karl, 2012. "Wine Economics," Journal of Wine Economics, Cambridge University Press, vol. 7(1), pages 1-33, May.
    19. Baur, Dirk G., 2013. "The autumn effect of gold," Research in International Business and Finance, Elsevier, vol. 27(1), pages 1-11.
    20. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    21. Burton, Benjamin J & Jacobsen, Joyce P, 2001. "The Rate of Return on Investment in Wine," Economic Inquiry, Western Economic Association International, vol. 39(3), pages 337-350, July.
    22. Byron, R P & Ashenfelter, Orley, 1995. "Predicting the Quality of an Unborn Grange," The Economic Record, The Economic Society of Australia, vol. 71(212), pages 40-53, March.
    23. Bollerslev, Tim, 1990. "Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 498-505, August.
    24. 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.
    25. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Cardebat, Jean-Marie & Jiao, Linda, 2018. "The long-term financial drivers of fine wine prices: The role of emerging markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 347-361.

    More about this item

    Keywords

    Wine; Gold; Alternative assets; Portfolio diversification;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:36:y:2016:i:c:p:591-614. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.