Is Wine a Good Choice for Investment?
Elie Bouri (),
Rangan Gupta (),
Wing-Keung Wong () and
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Zhenzhen Zhu: School of Statistics, Shandong University of Finance and Economics
No 201781, Working Papers from University of Pretoria, Department of Economics
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 (search for similar items in EconPapers)
JEL-codes: C10 G10 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg and nep-upt
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Journal Article: Is wine a good choice for investment? (2018)
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