Graduation Year
2017
Date of Submission
4-2017
Document Type
Open Access Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Janet Smith
Reader 2
Manfred Keil
Terms of Use & License Information
Rights Information
© 2017 Tania G Salomon
Abstract
This thesis evaluates the risk-return characteristics and diversification benefits of fine wine investment. It compares the historical performance of wine to that of equity, fixed income, real estate, and commodities. I calculate the correlation, volatility, and expected returns of these assets to examine whether adding wine to a portfolio increases its risk-adjusted return. I do this through the Markowitz portfolio optimization technique. The findings suggest that wine has a low correlation with traditional assets, providing diversification benefits. My results also show that adding wine to a portfolio increases its risk-adjusted return only when there is an allocation constraint of 0 to 25% per asset. This does not hold, however, when there are no asset allocation constraints.
Recommended Citation
Salomon, Tania, "The Risk-Return Characteristics and Diversification Benefits of Fine Wine Investment" (2017). CMC Senior Theses. 1668.
https://scholarship.claremont.edu/cmc_theses/1668
Included in
Business and Corporate Communications Commons, Corporate Finance Commons, E-Commerce Commons, Entrepreneurial and Small Business Operations Commons, Finance and Financial Management Commons, International Business Commons, Portfolio and Security Analysis Commons
