The Price of Wine
50 Pages Posted: 7 Sep 2013 Last revised: 19 Mar 2016
Date Written: June 4, 2015
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.
Keywords: wine prices; alternative investments; price indexes; psychic return; bubbles
JEL Classification: C43, D44, G11, G12, Q11, Z11
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