The Price of Wine
London Business School; University of Cambridge - Judge Business School
Peter L. Rousseau
Vanderbilt University - Department of Economics
HEC Paris - Finance Department
October 20, 2014
HEC Paris Research Paper No. FIN-2013-1019
Using historical price records for Premiers Crus Bordeaux, we examine the impact of aging on wine prices and the long-term investment performance of fine wine. In line with the predictions of an illustrative model, young maturing wines from high-quality vintages provide the highest financial returns. Past maturity, famous châteaus deliver growing non-pecuniary benefits to their owners. Using an arithmetic repeat-sales regression over 1900–2012, we estimate a real financial return to wine investment (net of storage costs) of 4.1%, which exceeds bonds, art, and stamps. Returns to wine and equities are positively correlated. Finally, we find evidence of in-sample return predictability.
Number of Pages in PDF File: 51
Keywords: wine prices; alternative investments; price indexes; psychic return; bubbles
JEL Classification: C43, D44, G11, G12, Q11, Z11working papers series
Date posted: September 7, 2013 ; Last revised: October 21, 2014
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