Analyzing the risk of an illiquid asset: the case of fine wine

Masset, Philippe (Ecole hôtelière de Lausanne, HES-SO // University of Applied Sciences Western Switzerland) ; Cardebat, Jean-Marie (Université de Bordeaux & Bordeaux Wine Economics) ; Faye, Benoît (INSEEC & Bordeaux Wine Economics) ; Le Fur, Eric (INSEEC & Bordeaux Wine Economics)

We use a unique and very deep database to examine the performance of wine investments during 2003–2014. Our results reveal that the returns stemming from those investments are important but can largely be explained by their exposure to common risk factors. As such and contradicting prior evidence, fine wines do not seem to offer abnormal returns. While explicitly accounting for non-synchronous trading, we indeed show that the market beta of wine is always positive and significant. Liquidity risk also turns out to be an essential determinant of wine returns. The fact that the liquidity factor, which is estimated on the basis of stock returns, can explain the returns on an exotic asset such as wine suggests that illiquidity is a common, cross-asset source of risk. Hence, this paper contributes to the literature on alternative investments and wine as an asset class and provides additional evidence regarding the nature of liquidity risk.

Type de conférence:
full paper
Economie et Services
EHL Ecole hôtelière de Lausanne
Adresse bibliogr.:
Lisbon, Portugal, 22-23 June 2017
Lisbon, Portugal
22-23 June 2017
42 p.
Titre du document hôte:
Proceedings of the Financial Management Association (FMA) European Conference 2017
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 Notice créée le 2017-10-27, modifiée le 2018-02-15

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