Is Wine a Good Choice for Investment?

54 Pages Posted: 1 Mar 2018 Last revised: 16 Mar 2018

See all articles by Elie Bouri

Elie Bouri

Université Saint Esprit de Kaslik (USEK)

Rangan Gupta

University of Pretoria - Department of Economics

Wing-Keung Wong

Asia University, Department of Finance

Zhenzhen Zhu

Shandong University of Finance and Economics

Date Written: February 21, 2018

Abstract

We extend our understanding on the role of wine investment within a portfolio of different assets (US/UK equities, bonds, gold, and housing) by considering a rich methodology based, among others, on the mean-variance and stochastic-dominance approaches. The main findings suggest that wine is the best investment among all individual assets under study, and investors prefer to invest in with-wine portfolios than without-wine portfolios to gain higher expected utility when short sale is not allowed. However, investors are indifferent between portfolios with and without wine when short-selling is allowed. In addition, with-wine portfolios generally either dominate individual assets or are indifferent from individual assets. Interestingly, the with-wine portfolios first-order stochastically dominates housing in both long-only and short-allowed strategies, pointing towards market inefficiency and thus the possibility for an expected arbitrage opportunity. Finally, we reveal that investors prefer the low-risk with-wine portfolios to the equal-weighted portfolio, but are indifferent between the high-risk with-wine portfolios and the naïve portfolio for both long-only and short-allowed strategies. Our findings can be used by investors in their investment processes and reveal the possibility of earning abnormal returns when wine is included in the investment.

Keywords: Wine investment; mean-variance portfolio optimization; mean-risk criterion; stochastic dominance; asset classes

JEL Classification: C10 ; G10 ; G15

Suggested Citation

Bouri, Elie and Gupta, Rangan and Wong, Wing-Keung and Zhu, Zhenzhen, Is Wine a Good Choice for Investment? (February 21, 2018). Available at SSRN: https://ssrn.com/abstract=3125471 or http://dx.doi.org/10.2139/ssrn.3125471

Elie Bouri

Université Saint Esprit de Kaslik (USEK) ( email )

KASLIK
Lebanon

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Wing-Keung Wong (Contact Author)

Asia University, Department of Finance ( email )

Taiwan
Taiwan

Zhenzhen Zhu

Shandong University of Finance and Economics

Erhuan East Road 7366
Jinan, Shandong 250014
China

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