Cheers to Enhanced Portfolio Performance: Wine as a Unique Asset Class

Abstract

This research is dedicated to the development of an innovative South African wine index, employing a repeat-sales regression methodology. The study is grounded in the principles of the growth-optimal portfolio, a fundamental component of the Platen (2006) Benchmark approach, alongside the foundations of modern portfolio theory. The primary aim is to investigate the impact of incorporating the newly established wine index into the overall investment portfolio. Our analytical findings reveal a favorable influence on portfolio growth rates and diversification, enhancing these aspects by introducing South African wine assets. This approach introduces investors to a novel avenue of diversification, capitalizing on the potential advantages offered by fine wine investments within their comprehensive portfolios. This research represents the initial successful endeavor in constructing a wine index within the South African investment landscape, thus contributing a valuable addition to the array of financial instruments accessible to investors.

Keywords: Diversifying Fine Wine Index, Growth-optimal portfolio, Markowitz model, Wine Investment

JEL Classification: C32, C63, C65