IDEAS home Printed from https://ideas.repec.org/p/ags/aawewp/37322.html
   My bibliography  Save this paper

Alternative investments: the case of wine

Author

Listed:
  • Sanning, Lee W.
  • Shaffer, Sherrill L.
  • Sharratt, Jo Marie

Abstract

For repeat transactions data from monthly auction hammer prices, we analyze the level and quality of Bordeaux wine returns using the Fama-French Three-Factor Model and the Capital Asset Pricing Model. Returns average up to 0.75% per month above those predicted by these models. Further, investment grade wines benefit from low exposure to market risk factors, thus offering a valuable dimension of portfolio diversification. These findings are consistent with simple theoretical considerations and support a documented growing interest in wine investments.

Suggested Citation

  • Sanning, Lee W. & Shaffer, Sherrill L. & Sharratt, Jo Marie, 2007. "Alternative investments: the case of wine," Working Papers 37322, American Association of Wine Economists.
  • Handle: RePEc:ags:aawewp:37322
    as

    Download full text from publisher

    File URL: http://purl.umn.edu/37322
    Download Restriction: no

    References listed on IDEAS

    as
    1. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. Ahmed, Parvez, 2001. "Forecasting correlation among equity mutual funds," Journal of Banking & Finance, Elsevier, vol. 25(6), pages 1187-1208, June.
    3. 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.
    4. Goetzmann, William N, 1993. "Accounting for Taste: Art and the Financial Markets over Three Centuries," American Economic Review, American Economic Association, vol. 83(5), pages 1370-1376, December.
    5. Buelens, Nathalie & Ginsburgh, Victor, 1993. "Revisiting Baumol's 'art as floating crap game'," European Economic Review, Elsevier, vol. 37(7), pages 1351-1371, October.
    6. Jones, Gregory V. & Storchmann, Karl-Heinz, 2001. "Wine market prices and investment under uncertainty: an econometric model for Bordeaux Crus Classes," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 26(2), November.
    7. Doron Nissim, 2001. "Dividend Changes and Future Profitability," Journal of Finance, American Finance Association, vol. 56(6), pages 2111-2133, December.
    8. Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
    9. Combris, Pierre & Lecocq, Sebastien & Visser, Michael, 1997. "Estimation for a Hedonic Price Equation for Bordeaux Wine: Does Quality Matter?," Economic Journal, Royal Economic Society, vol. 107(441), pages 390-402, March.
    10. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    11. G. Candela & A. Scorcu, 1997. "A Price Index for Art Market Auctions," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 21(3), pages 175-196, September.
    12. Amy Dittmar, 2004. "Capital Structure in Corporate Spin-Offs," The Journal of Business, University of Chicago Press, vol. 77(1), pages 9-44, January.
    13. 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.
    14. Pierre Combris & Sebastien Lecocq & Michael Visser, 2000. "Estimation of a hedonic price equation for Burgundy wine," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 961-967.
    15. Jean-Marie Cardebat & Jean-Marc Figuet, 2004. "What explains Bordeaux wine prices?," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 293-296.
    16. Benjamin J. Burton & Joyce P. Jacobsen, 1999. "Measuring Returns on Investments in Collectibles," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 193-212, Fall.
    17. Baumol, William J, 1986. "Unnatural Value: Or Art Investment as Floating Crap Game," American Economic Review, American Economic Association, vol. 76(2), pages 10-14, May.
    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. Lucia BALDI & Massimo PERI & Daniela VANDONE, 2010. "Is wine a financial parachute?," Departmental Working Papers 2010-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    2. Baldi, Lucia & Peri, Massimo & Vandone, Daniela, 2016. "Stock markets’ bubbles burst and volatility spillovers in agricultural commodity markets," Research in International Business and Finance, Elsevier, vol. 38(C), pages 277-285.
    3. Lucey, Brian M. & Devine, Liam, 2015. "Was wine a premier cru investment?," Research in International Business and Finance, Elsevier, vol. 34(C), pages 33-51.
    4. Ormos, Mihály & Erdős, Péter, 2011. "Borok mint alternatív befektetési lehetőségek
      [Wines as an alternative investment]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 158-172.

    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:ags:aawewp:37322. 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: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/aaweeea.html .

    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.