This paper analyzes price patterns and long-run relationships for both fine wine and non-fine wine, with the aim to highlight price dynamics and co-movements between series, and to exploit potential diversification benefits. Data are from Liv-Ex 100 Fine Wine for fine wine, the Mediobanca Global Wine Industry Share Price for normal wine, and the MSCI World Index as a proxy of the overall stock market. Engle-Granger and Johansen tests were used to detect whether and to what extent the series co-move in the long run and which one of the variables contributes proactively to such an equilibrium by reacting to disequilibria from the long-run path. The estimates highlight that i) the two wine indexes have a higher Sharpe ratio compared to the general stock market index, revealing wine stocks as a profitable investment per se, and ii) the absence of cointegration among the three series and the existence of possible diversification benefits. In fact, in the long-run price do not move together and, therefore, investors may be better off by including wine stocks into investment portfolios and take advantage of diversification.

A cointegration analysis of wine stock indexes / I. Sabina, E. Bacchiocchi, D. Vandone. - In: RISK GOVERNANCE & CONTROL: FINANCIAL MARKETS & INSTITUTIONS. - ISSN 2077-429X. - 7:4(2017), pp. 178-188. [10.22495/rgc7i4c2art1]

A cointegration analysis of wine stock indexes

E. Bacchiocchi
Membro del Collaboration Group
;
D. Vandone
Membro del Collaboration Group
2017

Abstract

This paper analyzes price patterns and long-run relationships for both fine wine and non-fine wine, with the aim to highlight price dynamics and co-movements between series, and to exploit potential diversification benefits. Data are from Liv-Ex 100 Fine Wine for fine wine, the Mediobanca Global Wine Industry Share Price for normal wine, and the MSCI World Index as a proxy of the overall stock market. Engle-Granger and Johansen tests were used to detect whether and to what extent the series co-move in the long run and which one of the variables contributes proactively to such an equilibrium by reacting to disequilibria from the long-run path. The estimates highlight that i) the two wine indexes have a higher Sharpe ratio compared to the general stock market index, revealing wine stocks as a profitable investment per se, and ii) the absence of cointegration among the three series and the existence of possible diversification benefits. In fact, in the long-run price do not move together and, therefore, investors may be better off by including wine stocks into investment portfolios and take advantage of diversification.
commodity market, wine, portfolio diversification, cointegration
Settore SECS-P/11 - Economia degli Intermediari Finanziari
Settore SECS-P/05 - Econometria
2017
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/534560
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