To Save or Savor: A Review of Approaches for Measuring Wine as an Investment

2014 ◽  
Vol 9 (3) ◽  
pp. 225-248 ◽  
Author(s):  
James J. Fogarty ◽  
Rohan Sadler
Keyword(s):  
Estimation Method ◽  
Efficient Frontier ◽  
Hedonic Model ◽  
Portfolio Risk ◽  
Return Distribution ◽  
Simple Modification ◽  
Risk Diversification ◽  
Comprehensive Method ◽  
Diversification Benefit ◽  
Jel Classifications

AbstractIn the literature, there is no standard approach for estimating the return to wine or testing for a portfolio risk diversification benefit from holding wine. Using auction data for Australian wine, we show that the estimation method has a material impact on the estimated wine return distribution and that the type of diversification benefit test used influences whether or not wine is found to provide a portfolio risk diversification benefit. Our results indicated that a simple modification to the hedonic model, which we call a pooled model, is an appropriate method for estimating the return to infrequently traded heterogeneous assets such as wine. Across the various approaches to testing for a risk diversification benefit, we find direct estimation of the efficient frontier with bootstrapped confidence intervals to be the most transparent and comprehensive method of illustrating wine's potential for lowering portfolio risk. (JEL Classifications: G11, C61, C13)

scholarly journals Emergence of Commodity Derivatives as Defensive Instrument in Portfolio Risk Hedging: A Case of Indian Commodity Markets

2017 ◽  
Vol 12 (1) ◽  
pp. 202-234 ◽  
Author(s):  
Shelly Singhal
Keyword(s):  
Efficient Frontier ◽  
Commodity Markets ◽  
Portfolio Risk ◽  
Daily Growth ◽  
Risk Hedging ◽  
Risk Return ◽  
Daily Data ◽  
Relative Standard ◽  
Commodity Derivatives ◽  
Diversification Benefit

AbstractThis paper empirically examines whether commodity derivatives can be used as an alternative investment asset in India where commodity markets are at emerging state and provides the same diversification benefit as they provide in developed commodity markets. In India only commodity futures are prevalent so various commodity indices representing various sectors has been used in the study. Diversification aspect of commodity derivatives has been tested initially by using correlation analysis. Compounded Daily Growth rate and Relative Standard deviation has been used as a measure of calculating risk and return of daily data of SENSEX, BOND and four Commodity Indices (MCX Comdex, MCX AGRI, MCX Metal, MCX Energy). Markowitz Efficient Frontier theory has been used to calculate portfolio risk return and Sharpe risk adjusted ratio has been used to evaluate the various portfolios. Optimal portfolio has been obtained for the combination of equity, bond and commodity and overall results of the study indicate that an investor who is risk averse will prefer to invest in combination of SENSEX, BOND & MCX Energy whereas an investor who gets utility by taking more risk for more returns will prefer to invest in combination of SENSEX, BOND & MCX Metal. Investor having inclination towards moderate risk return would tend to invest in MCX AGRI along with SENSEX and BOND.

On portfolio risk diversification

2017 ◽  
Author(s):  
Hellinton H. Takada ◽  
Julio M. Stern
Keyword(s):  
Portfolio Risk ◽  
Risk Diversification

On the Constancy of Hedonic Wine Price Coefficients over Time

2019 ◽  
Vol 14 (2) ◽  
pp. 182-207 ◽  
Author(s):  
Benoît Faye ◽  
Eric Le Fur
Keyword(s):  
Time Series ◽  
Literature Review ◽  
Time Series Data ◽  
Hedonic Model ◽  
Series Data ◽  
Extensive Literature ◽  
Long Run ◽  
The Stability ◽  
Over Time ◽  
Jel Classifications

AbstractThis article tests the stability of the main hedonic wine price coefficients over time. We draw on an extensive literature review to identify the most frequently used methodology and define a standard hedonic model. We estimate this model on monthly subsamples of a worldwide auction database of the most commonly exchanged fine wines. This provides, for each attribute, a monthly time series of hedonic coefficients time series data from 2003 to 2014. Using a multivariate autoregressive model, we then study the stability of these coefficients over time and test the existence of structural or cyclical changes related to fluctuations in general price levels. We find that most hedonic coefficients are variable and either exhibit structural or cyclical variations over time. These findings shed doubt on the relevance of both short- and long-run hedonic estimations. (JEL Classifications: C13, C22, D44, G11)

The Effectiveness of Portfolio Risk Diversification: An Additive Approach by Project Replication

2015 ◽  
Vol 46 (5) ◽  
pp. 94-110 ◽  
Author(s):  
Jean-Paul Paquin ◽  
David Tessier ◽  
Céline Gauthier
Keyword(s):  
Portfolio Risk ◽  
Risk Diversification

scholarly journals Quaternion Valued Risk Diversification

Entropy ◽  
2020 ◽  
Vol 22 (4) ◽  
pp. 390 ◽  
Author(s):  
Seisuke Sugitomo ◽  
Keiichi Maeta
Keyword(s):  
Portfolio Optimization ◽  
Optimization Algorithms ◽  
Construction Method ◽  
Portfolio Construction ◽  
Portfolio Risk ◽  
Risk Diversification ◽  
Portfolio Managers

Risk diversification is an important topic for portfolio managers. Various portfolio optimization algorithms have been developed to minimize portfolio risk under certain constraints. As an extension of the complex risk diversification portfolio proposed by Uchiyama, Kadoya, and Nakagawa in January 2019 (Yusuke et al. Entropy. 2019, 21, 119.), we propose a risk diversification portfolio construction method which incorporates quaternion risk. We show that the proposed method outperforms the conventional complex risk diversification portfolio method.

Does Diversification Drive Down Risk-adjusted Returns? A Quantile Regression Approach

2017 ◽  
Vol 11 (2) ◽  
Author(s):  
Jeungbo Shim
Keyword(s):  
Quantile Regression ◽  
Insurance Industry ◽  
Estimation Method ◽  
Product Diversification ◽  
Return Distribution ◽  
Diversification Discount ◽  
Explanatory Variables ◽  
Heterogeneous Effects ◽  
Mean Estimation ◽  
Alternative Measures

AbstractThis study examines diversification-performance relationship in the U.S. property-liability insurance industry over the period of 1996–2010. Unlike prior studies that rely on the conditional mean estimation method, we employ quantile regression, which captures the heterogeneous effects of diversification on conditional return distribution. The results show that diversification does not necessarily drive down risk-adjusted returns and its effects vary along return distribution. We find that there is a diversification discount for firms in the lower levels of return distribution, whereas a diversification premium exists for firms in the upper levels of return distribution. We provide evidence that the relations between risk-adjusted returns and other explanatory variables are not constant, but vary over the quantiles of return distribution. Our results are robust to alternative measures of an insurer’s performance and product diversification.

When Rationality Meets Passion: On the Financial Performance of Collectibles

2018 ◽  
Keyword(s):  
Global Financial Crisis ◽  
Significant Risk ◽  
Fixed Income ◽  
Portfolio Risk ◽  
Time Correlations ◽  
Asset Class ◽  
Art Display ◽  
The Global Financial Crisis ◽  
Diversification Benefit ◽  
Real Assets

This article examines prior evidence and proposes an empirical study of the performance of passion investments in comparison with financial and real assets over the past 20 years. Over this period, classic cars and fine wines (but not visual art) display better returns than U.S. equity, fixed income, and real estate. Volatilities are, overall, low but increase once returns are adjusted for the inherent illiquidity on collectible markets. In a CAPM framework, only classic cars yield significant risk-adjusted returns with an annualized alpha of 5%. At the same time, correlations and systematic risk are low for all collectibles. This diversification benefit is confirmed by a 7% portfolio risk reduction following the inclusion of collectibles in a traditional financial portfolio. The authors further document that the inherent segmentation of collectible classes extends the benefits of cross-asset to intra-asset class diversification. Finally, they find that collectibles have performed slightly less well since the Global Financial Crisis.

The emergence and performance of German REITs

2018 ◽  
Vol 36 (1) ◽  
pp. 91-103 ◽  
Author(s):  
Graeme Newell ◽  
Muhammad Jufri Marzuki
Keyword(s):  
Asset Allocation ◽  
Global Financial Crisis ◽  
Investment Decision ◽  
Efficient Frontier ◽  
Portfolio Diversification ◽  
Portfolio Risk ◽  
Content Type ◽  
Property Companies ◽  
Asset Portfolio

Purpose German real estate investment trusts (REITs) are a small but important property investment vehicle in the European REIT landscape, offering German commercial property investment exposure in a liquid format, compared to the more property development-focused German listed property companies and the popular German open-ended property funds. The purpose of this paper is to assess the emergence of the German REIT market and the risk-adjusted performance and portfolio diversification benefits of German REITs in a mixed-asset portfolio over 2007-2015. The post-global financial crisis (GFC) recovery of German REITs is highlighted. Enabling strategies for the ongoing development of the German REIT market are also identified. Design/methodology/approach Using monthly total returns, the risk-adjusted performance and portfolio diversification benefits of German REITs over 2007-2015 are assessed. Efficient frontier and asset allocation diagrams are used to assess the role of German REITs (and German property companies) in a mixed-asset portfolio. Sub-period analysis is used to assess the post-GFC recovery of German REITs. Findings German REITs delivered lesser risk-adjusted returns compared to German stocks over 2007-2015, with limited portfolio diversification benefits. However, since the GFC, German REITs have delivered strong risk-adjusted returns, but with continued limited portfolio diversification benefits with German stocks. German REITs also out-performed German property companies. Importantly, this sees German REITs as strongly contributing to the German mixed-asset portfolio across the portfolio risk spectrum in the post-GFC environment. Practical implications German REITs are a small but important market at a local, European and global REIT level. The results highlight the major role of German REITs in a German mixed-asset portfolio in the post-GFC context. The strong risk-adjusted performance of German REITs compared to German stocks sees German REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum. This is particularly important, as many investors (e.g. small pension funds) use German REITs (and German listed property companies) to obtain their German property exposure in a liquid format, as well as the increased importance of blended property portfolios of listed property and direct property. Originality/value This paper is the first published empirical research analysis of the risk-adjusted performance of German REITs, and the role of German REITs as a listed property vehicle in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision making regarding the strategic role of German REITs in a portfolio.

The significance and performance of UK-REITs in a mixed-asset portfolio

2016 ◽  
Vol 9 (2) ◽  
pp. 171-182 ◽  
Author(s):  
Graeme Newell ◽  
Muhammad Jufri Bin Marzuki
Keyword(s):  
Asset Allocation ◽  
Global Financial Crisis ◽  
Investment Decision ◽  
Efficient Frontier ◽  
Portfolio Diversification ◽  
Defined Contribution ◽  
Portfolio Risk ◽  
Content Type ◽  
Asset Portfolio

Purpose UK-Real Estate Investment Trusts (REITs) are an important property investment vehicle, being the fourth largest REIT market globally. The purpose of this paper is to assess the significance, risk-adjusted performance and portfolio diversification benefits of UK-REITs in a mixed-asset portfolio over 2007−2014. The post-global financial crisis (GFC) recovery of UK-REITs is highlighted. Design/methodology/approach Using total monthly returns, the risk-adjusted performance and portfolio diversification benefits of UK-REITs over 2007–2014 are assessed. Efficient frontier and asset allocation diagrams are used to assess the role of UK-REITs in a mixed-asset portfolio. Sub-period analysis is used to assess the post-GFC recovery of UK-REITs. Findings UK-REITs delivered poor risk-adjusted returns compared to UK stocks over 2007–2014 with limited portfolio diversification benefits. However, since the GFC, UK-REITs have delivered strong risk-adjusted returns, but with continued limited portfolio diversification benefits with UK stocks. Importantly, this sees UK-REITs as strongly contributing to the UK mixed-asset portfolio across the portfolio risk spectrum in the post-GFC environment. Practical implications UK-REITs are a significant market at a European and global REIT level. The results highlight the major role of UK-REITs in a UK mixed-asset portfolio in the post-GFC context. The strong risk-adjusted performance of UK-REITs compared to UK stocks sees UK-REITs contributing to the mixed-asset portfolio across the portfolio risk spectrum. This is particularly important, as many investors (e.g. small pension funds, defined contribution [DC] funds) use UK-REITs to obtain their property exposure in a liquid format, as well as the increased importance of blended property portfolios of listed property and direct property. Originality/value This paper is the first published empirical research analysis of the risk-adjusted performance of UK-REITs and the role of UK-REITs in a mixed-asset portfolio. This research enables empirically validated, more informed and practical property investment decision-making regarding the strategic role of UK-REITs in a portfolio.

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