The Economics Of Wine: Pricing, Quality And Rate Of Return - Part V: A Mean-Variance Approach To Wine Investment & Summary And Conclusion
The previous chapter developed an approach suitable for estimating asset returns in markets like wine, where goods are heterogeneous, and sales observations infrequent and irregular. The approach developed is known as the adjacent period hedonic price equation method, and based on this approach the mean quarterly rate of return to wine over the period 1989Q4 to 2000Q4 was estimated to be 2.6 percent, with standard deviation 6.7 percent. The previous chapter did however note the rate of return to wine varied across vintage, variety, and price. This paper presents a more detailed analysis of the rate of return to wine, and in doing so focuses on whether wine returns can be analyzed using the same techniques used to study the return to standard financial assets.