AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 163 – Economics

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AAWE Working Paper No. 163 – Economics

Wine: To Drink or Invest In? A Study of Wine as a Financial Asset in French Portfolios

Beysül Aytac, Thi Hong Van Hoang & Cyrille Mandou

Abstract

This paper aims to assess the role of wine as a financial asset in the diversification of French investors’ portfolios. Our 2007-2013 monthly database is composed of Liv-ex indexes and the WineDex indexes from iDealwine, an online platform for wine investment in France. We also include stocks, bonds and a risk-free asset and constitute several portfolios based on the degree of investor risk aversion, as proposed by Canner et al. (1997). Moreover, we compare wine to another alternative asset, gold. Using both mean-variance (Markowitz 1952) and mean value-at-risk (Favre and Galeano 2002) portfolio optimization, we find that portfolios with wine (or gold) are more efficient than portfolios without it. Moreover, we use the Sharpe (1964) and modified Sharpe (Gregoriou and Gueyie 2003) ratios to calculate performance and find that the higher the proportion of wine (or gold), from 5% to 50%, the higher the portfolio performance is. We also find that French wine indexes, particularly WineDex Bordeaux, are more profitable than gold or Liv-ex indexes. This suggests that French investors should invest in wine through iDealwine and not through Liv-ex.

This article was written by Karl Storchmann

1 comment:

Joe StrausJuly 24, 2014 at 4:33 pmReply

As with most analyses of time-series, the results depend greatly on the starting point. I note that your study uses data that begin in January 2007, prior to the “great recession.” Have you carried out the same analysis, using different starting points, in particular, January 2009, when the CAC-40 and the MSCI indeces reached their lows and have recovered substantially from then?

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