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
December 11, 2014
Journal of Financial Economics (JFE), Forthcoming
Using historical price records for Bordeaux Premiers Crus, 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: 50
Keywords: wine prices; alternative investments; price indexes; psychic return; bubbles
JEL Classification: C43, D44, G11, G12, Q11, Z11Accepted Paper Series
Date posted: September 7, 2013 ; Last revised: December 12, 2014
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