 Mitigating downside risk of portfolio diversification: Wine versus other tangible assetsPhilippe Masset and Frantz Maurer Economic Modelling, 2021, vol. 102, issue C Abstract: Investors increasingly use tangible assets and especially wine to reduce the volatility of their portfolios through improved diversification. However, these assets are long-horizon investments, and therefore, short-term fluctuations (volatility) are of little relevance. Instead, assessing if these assets reduce the risk of facing severe losses (downside risk) appears more appropriate. Unfortunately, the literature offers little guidance on this issue. To address this, we analyze portfolios containing both traditional and tangible assets. Our results demonstrate that wine not only presents a lower downside risk than most other tangible assets but also reduces portfolios’ downside risk. This is due to wine-market specific factors driving wine returns and thus disconnecting them from other asset returns. We also show that gold presents similar advantages as wine and that combining these two assets may further enhance their effect. Overall, allocating around 10% of a portfolio to wine seems sensible from a downside risk management perspective. Keywords: Fine wines; Tangible assets; Alternative investments; Downside risk; Extreme returns (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:102:y:2021:i:c:s0264999321001681 DOI: 10.1016/j.econmod.2021.105579 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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