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Purpose This study aims to identify the price determinants of fine wines in a small and competitive market. These characteristics are found in many lesser-known wine-producing countries and are often difficult to analyse because of lack of data. Design/methodology/approach This study hand-collects and transcribes wine-related data for 149 Swiss wineries and 2,454 individual wines over the period 2014–2018 directly from wine lists provided by wineries. This study uses multivariate ordinary least squares regressions to analyse the relation between wine attributes and prices and to assess the effect of a currency shock caused by the sudden appreciation of the Swiss franc in 2015 as well as a reduction in information asymmetries induced by the novel coverage of Swiss wines by The Wine Advocate. Findings Prices mainly depend on collective reputation, production techniques and product positioning. Surprisingly, following a sharp appreciation of the Swiss franc, producers did not reduce prices. The arrival of a highly influential wine expert on the market also had a positive price effect on rated wines and producers. Both hint at wineries attempting to position themselves relative to competitors. Originality/value Few studies examine the price drivers in lesser-known wine markets, where competition is fierce. This study’s results show that wine pricing differs from other more famous and larger wine regions. In addition, to the best of the authors’ knowledge, this study is also the first to analyse the impact of a currency shock and a reduction in information asymmetries on wine prices.

We use a unique and very deep database to examine the performance of wine investments over the period 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. It appears essential to properly account for the lack of liquidity on the wine market and its exposure to global currency risk. Controlling for these wine market specificities and contradicting prior evidence, fine wines do not seem to offer abnormal returns.

This paper investigates the impact of the coronavirus disease 2019 pandemic on investors' trading behaviors around ex‐dividend dates in Europe. The sudden decrease in the number of companies paying dividends reduced the opportunities to capture dividends. Thus, the firms that maintained dividend payments during the pandemic attracted more interest than before. This led to a doubling in the magnitude of stock return patterns usually observed around ex‐dividend days. Our evidence indicates that dividend‐seeking investors are likely to be the main driver of the price patterns observed around ex‐dividend dates.

This paper models optimal release prices of an experience good recurrently issued on markets. Using a large sample of Bordeaux wines, we find that not only intrinsic but also extrinsic attributes affect release prices. We observe a significant relationship between primary market release prices and secondary market prices and general economic conditions. Release prices can deviate from secondary market prices in the short run but remain aligned over the long run. On average, Bordeaux wine producers have excessively increased wine prices leading to an 18% overpricing between 2004 and 2018. Finally, following the COVID-19 pandemic, Bordeaux wine should be offered at a 20% price discount in 2020

We examine the existence of wine in New York City restaurant menus over the period 1865 to 1920 for a sample of 850,000 restaurant menu items and 51,000 wines. Wine was already commonly present on menus in 1865, and its offering increased up until 1914 before dropping with the outbreak of First World War (WWI). Casual restaurants offered a narrower wine selection. Special menus displayed a significantly higher probability of containing wine but with a more limited choice indicating that wine was especially appreciated on special occasions. French wines, especially from Bordeaux and Champagne, were the most represented on menus followed by wines from Germany. The average selling price of a bottle of wine was around US$40 in 2018 terms. Prices, however, fluctuated widely over time and wine type. Notably, American wines were about 50% less expensive than French or German wines.

We identify and examine the performance of frontier investments from 2002 to 2017. Using fine wine as a setting, we find that the trade frequency and value of frontier investments in the form of Alpine wines have increased in recent years, leading to a rise in their prices above inflation rates. We further document that this frontier investment has been favorable in terms of risk-adjusted returns and volatility for investors. We also observe that the inclusion of frontier wines in a financial portfolio is favorable for investors, both in terms of returns and diversification benefits, due to low correlation coefficients. The identification and investment into frontier assets appears beneficial for investors looking for new opportunities. (JEL Classifications: C60, G11, Q11)

We introduce a heterogeneous agent model to explain the dynamics of fine wine investments. Our results show evidence of the existence of both fundamentalists – those who trade on mean-reversion tow...

This paper explores the price determinants of fine wines in a competitive and opaque market. Intense international competition, high production costs and information asymmetries, result in Swiss wine prices that mostly depend on collective reputation, production techniques, and product positioning. Following an exogenous currency shock, producers have reacted with a 5% price increase. Finally, a reduction in information asymmetries with the arrival of an influential wine expert on the market had a positive price effect on rated wines and producers. These two findings suggest that wine producers have used this situation to review their wines' pricing and positioning.

We examine the existence of wines in New York City restaurant menus over the period 1865-1920 for a sample of 850,000 restaurant menu items and 51,000 wines. Wine was already commonly present on menus in 1865, and its presence increased up until 1914 before dropping with the outbreak of WWI. Casual restaurants offered a narrower wine selection. Special menus displayed a significantly higher probability of containing wine but with a more limited choice indicating that wine was especially appreciated on special occasions. French wines, especially from Bordeaux and Champagne, were the most represented on menus followed by wines from Germany. The average selling price of a bottle of wine was around 40 USD in 2018 terms. Prices, however, fluctuated widely over time and wine type. Notably, American wines were about 50% cheaper than French or German wines.

This paper explores the effects of online customer ratings on debt capacity. Using a large sample of Parisian restaurants, we find a positive and economically significant relation between customer ratings and bank debt. We use the locally exogenous variation in customer ratings resulting from the rounding of scores in regression discontinuity tests to establish causality. Customer ratings affect financial policy through a reduction in cash flow risk and higher resilience to demand shocks. Restaurants with good ratings use their extra debt capacity to invest in tangible assets. Finally, favorable online ratings relax credit constraints mostly for moderately constrained restaurants.

COVID-19 has officially been declared a pandemic since March 11, 2020. Its effect during the second quarter of 2020 and its forecasted impact on the economy are dramatic. For some industries, the crisis is likely to become the most severe since the Great Depression. In this article, we investigate the economic impact of COVID-19 on the fine wine market. We propose two approaches to study this phenomenon. First, using economic determinants, we estimate that wine prices could drop by as much as 35%. Second, from a historical perspective, we show that the wine market will need to lower prices to remain resilient and that various sub-markets may differ in their reaction to a future economic downturn.

This paper models optimal release prices of an experience good recurrently issued on markets. Using a large sample of Bordeaux wines, we find that not only intrinsic but also extrinsic attributes affect release prices. We observe a significant relationship between primary market release prices and secondary market prices and general economic conditions. Release prices can deviate from secondary market prices in the short run but remain aligned over the long run. On average, Bordeaux wine producers have excessively increased wine prices leading to an 18% overpricing between 2004 and 2018. Finally, following the COVID-19 pandemic, Bordeaux wine should be offered at a 20% price discount in 2020

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.

This paper examines and compares wine price indices available on the wine market with those proposed in academia. We especially analyze the impact illiquidity has on the different indices and validate our findings using a simulation which allows us to define the biases induced by illiquidity on the statistical properties of the indices. We also propose adjustments to help market participants improve the reliability of wine indices and ultimately their decision-making. Our evidence indicates that both the volatility and the beta of fine wine is understated when estimated with existing wine index data. The true volatility and beta of the First Growths from Bordeaux appear to be close to 20%, respectively 0.45–0.60, suggesting that the diversification potential of fine wine is more limited than commonly believed.

This article uses hammer prices from five global auction houses to analyse the price premium Bordeaux fine wine yielded at Hong Kong wine auctions. We find that fine wine was on average sold at a 19% premium in Hong Kong. We further observe that the Hong Kong premium is not uniform and most pronounced for wines with perfect Parker scores and the most powerful brands. The premium has declined throughout the sample period from 60% in 2008 to a level of 15% since 2012. This can be attributed to the increase in knowledge on fine wine by Chinese customers.

Switzerland’s wine landscape deserves closer academic analysis due to its peculiar structure, production conditions and market. The Alps and differences in altitudes, soil composition, exposures and hygrometry result in a variety of terroirs and, thus, a large number of wine types can be encountered. Generally, two business models are encountered in Switzerland: small family wineries which sell most of their production directly to final consumers and cooperatives/larger wineries which sell mainly through supermarkets. In terms of wine market, Switzerland is saturated by both local and international players. In order to compete, Swiss winemakers therefore need to focus on quality and rely on a differentiation strategy. While producing and consuming locally has worked out for Swiss winemakers thus far, in the future, they will need to evolve and focus on increased visibility and exportation.

We examine the effect of the relative liquidity of international equity exchange-traded funds (ETFs) and their constituent portfolios on the price difference between the fund’s market prices and its net asset values. We use data for a sample of 584 international equity ETFs listed in the U.S. over the period January 2012 to December 2017 and find that higher liquidity is associated with a lower absolute value of the ETF premium/discount. We document a positive relationship between liquidity and the price convergence of the ETFs and their underlying shares. The effect of liquidity on convergence is stronger for ETFs with high holding costs.

This paper investigates the risk and return features of an investment in the cannabis industry. It further describes the current state of the market for cannabis and critically examines its potential future development. Findings show that a portfolio of cannabis stocks displays high volatilities and returns, but also low correlations and beta coefficients with regard to overall stock markets, other sin industries or cryptocurrencies. This makes it an interesting addition to financial portfolios.

We study the effect of dividend taxes on the payout and investment policies of publicly listed firms. To do so, we exploit a unique setting in Switzerland where, following the corporate tax reform of 2011, some but not all firms were suddenly able to pay tax-exempt dividends to their shareholders. Using a difference-in-differences specification, we show that treated firms swiftly and permanently increase their dividend payout by around 30% compared to control firms after the tax cut. When studying the effect of agency conflicts, we show that the impact on the payout is less pronounced for firms in which the controlling shareholders have more voting rights than cash-flow rights. We find a significant positive abnormal stock return after the announcement of the payment of a tax-exempt dividend. However, reducing dividend taxes does not boost investment. This is due to a significant drop in retained earnings and to the fact that equity issuances do not surge after the tax cut. Our evidence is consistent with models where the marginal source of finance is retained earnings, and inconsistent with the neoclassical theory of dividend taxation.

This article analyses founding family influence on pay-out policies for Swiss listed firms over the period 2003–2010. We hypothesise that family firms have different incentives and characteristics that affect pay-out decisions and propose three possible explanations: agency theory, reputation building and family income needs. Our results show that founding family firms display significantly higher dividend pay-outs relative to companies with other ownership structures. We also examine specific family characteristics and document that a family's stake, active involvement and generation play an important role in determining pay-out policies. Our findings appear to be consistent with the family income hypothesis and to some extent with reputational concerns.

This article examines the performance, selectivity, and market-timing abilities of wine fund managers over the 2000–2013 period. The authors hypothesize that wine fund managers should be able to profit from market inefficiencies on the wine market and generate abnormal returns for investors. Their results show that fund managers’ overall selectivity and market-timing abilities appear to be limited. Only one fund offers positive risk-adjusted returns and two funds show a tendency for market timing. Considering non-quantifiable risks, wine funds thus do not appear to be interesting investments.

This paper examines the ratings of 12 influential wine critics on the Bordeaux en primeur market over the vintages 2003–2012. We hypothesize that wine experts differ significantly in their rating approach and influence on prices. We find that European critics are less transparent and in general more severe in their scoring than their American counterparts. Experts also appear to reach a relatively strong consensus on overall wine quality but have more diverse opinions on wines that achieve a surprising level of quality given the vintage, the ranking, or the appellation from which they originate. Our evidence also suggests that Robert Parker and Jean-Marc Quarin are the most influential critics, as a 10% surprise in their scores leads to a price increase of around 7%. We further find that their impact is higher for appellations and estates that are not covered by the official 1855 classification and for the best vintages. (JEL Classifications: C60, G11, Q11)

This paper examines how family and non-family ownership affects the performance of Swiss listed firms from 2003 to 2010. We distinguish between these two types of controlling shareholders since they have different objectives. We hypothesise that only family shareholders have a real incentive to reduce agency costs whereas non-family blockholders are similar to widely held companies. Our results show that family firms are more profitable than companies that are widely held or have a non-family blockholder. For market valuations we find that the family stake plays a critical role and document a concave relationship between family ownership and Tobin’s Q. We also investigate the impact of different features of family firms on performance, and document that the generation of the family and the active involvement of the family play an important role for market valuation.

Practical Applications Summary In When Rationality Meets Passion: On the Financial Performance of Collectibles, published in the Fall 2018 issue of The Journal of Alternative Investments, authors Philippe Masset and Jean-Philippe Weisskopf, both associate professors at Ecole hoteliere de Lausanne in Lausanne, Switzerland, evaluate the investment performance of collectibles such as visual art, fine wine, and classic cars over an 18-year period. They conclude that buying collectibles has some benefit as a form of portfolio diversification. However, when the illiquidity of collectibles is taken into account, most fail to meaningfully outperform. In addition, the high cost and complexity of investing in collectibles places them beyond the reach of all but the wealthiest investors.

Using a dataset that spans the period 1996 to 2007 and contains transaction prices for all reported auctions at the Chicago Wine Company, we analyze how the prices of high-end wines have evolved during this time period. The best wines according to characteristics like vintage, rating and ranking earn higher returns and tend to have a lower variance than poorer wines. Nevertheless, the different categories of wines seem to follow a rather similar trend over the long run. Wine returns are only slightly correlated with other assets and can consequently be used to reduce the risk of an equity portfolio. Wine looks even more attractive when the investor also has concerns about the skewness of his portfolio. However, the part to be invested in wine is reduced once the kurtosis is included into the analysis. Finally, it seems advisable to diversify across different wine categories as their short-run movements are partially independent of each other. First growths and wines rated as extraordinary by Robert Parker deliver the best tradeoff in terms of portfolio expected returns, variance, skewness and kurtosis for most investor preference settings under consideration. (JEL Classification: C60, G11, Q11)

This paper studies the price evolution and the performance of an investment in fine wine on the Swiss market over the period 2002-2012. Using a repeat-sales-regression approach we calculate different wine indices based on auction hammer prices obtained by Steinfels Weinauktionen. Our results show that different fine wines followed a similar evolution across the sample period but that the amplitude of returns strongly depended on wine regions and types. While Bordeaux and Burgundy wines performed well, wines from the Rhone valley and Italy show a poorer performance. Compared to financial assets wine has significantly outperformed stocks, but not bonds. We further find that the Swiss franc appreciation has had a significant impact on wine prices.

In this paper, we analyze the evolution of fine wine prices over the period 2000-2010 on the Swiss market. We first estimate a fine wine index with several sub-indices (e.g. Bordeaux index, First growth index) using hand-collected hammer prices from Steinfels – the leading wine auction house in Switzerland. We then study the evolution of these wine indices. Not surprisingly, we find that high-end wines have achieved impressive returns over the last decade, with first growths from the Medoc being the very best performers. They have significantly outperformed Swiss stocks whilst maintaining a weak correlation with traditional asset classes like equities and bonds. These results confirm previous evidence that fine wine can be considered as an appealing alternative investment vehicle.

This article analyses founding family influence on pay-out policies for Swiss listed firms over the period 2003-2010. We hypothesise that family firms have different incentives and characteristics that affect pay-out decisions and propose three possible explanations: agency theory, reputation building and family income needs. Our results show that founding family firms display significantly higher dividend pay-outs relative to companies with other ownership structures. We also examine specific family characteristics and document that the family stake, the active involvement and generation of the family play an important role for pay-out policies. Our findings appear to be consistent with the family income hypothesis and to some extent with reputational concerns.

This paper uses auction hammer prices over the period 1996-2009, with a special emphasis on periods of economic downturns, to examine risk, return and diversification benefits of fine wine. Our research shows evidence that the wine market is heterogeneous with wine regions and price categories evolving differently in terms of volume and turnover. We construct wine indices for various wine regions and prices using repeat-sales regressions and find out that fine wine yields higher returns and has a lower volatility compared to stocks especially in times of economic crises. Forming portfolios for typical investors and taking risk aversion, different financial assets and various wine indices into consideration we confirm that the addition of wine to a portfolio as a separate asset-class is beneficial for private investors. Not only are returns favourably impacted and risk being minimised but skewness and kurtosis are also positively affected. Particularly, during the recent financial crisis these effects are most pronounced and improve portfolio diversification when it is most needed. Most importantly, balancing a portfolio with fine wine has resulted in added return while reducing volatility with the most prestigious and expensive vintages and estates outperforming the General Wine Index (GWI) during the entire research period. Results from the CAPM show that alpha is significantly positive over the period 1996- 2009 while showing a low beta coefficient. The use of a conditional CAPM model allows us to clarify the time-variance of alphas and betas depending on the economic environment that is not generally captured by the traditional CAPM. The time-varying dynamics of alphas and betas are in particular best explained by the spread between BAA- and AAA-rated bonds and the USD/EUR foreign exchange rate. Our findings confirm that wine returns are primarily related to economic conditions and not to the market risk.

Recent research has documented that family-controlled firms are very common around the world. This paper provides new evidence on the accounting and market performance of this type of companies. The empirical investigation is conducted on a market in which family firms are well-established and represent the most widespread form of ownership, namely Switzerland. Using panel data for the period 2003 to 2007 on companies listed on the Swiss exchange, we find evidence that family firms have a 1.19 higher Tobin’s Q and a 3% higher return on assets than non-family firms. A finer analysis reveals that the outperformance depends on the characteristics of the family business. First, we find evidence that family firms in which a second blockholder is present are even more profitable with a 5% higher return on assets and a 1.27 higher Tobin’s Q than non-family firms. In this case not only agency costs between management and shareholders are reduced but also between majority and minority shareholders by limiting private benefit extraction. Second, family firms in which a family is only an investor do not perform better than non-family firms. Only if family members are actively involved in management, as either CEO, Chairman or both do they add value and thus perform significantly better than outsiders. This indicates that family members have superior knowledge on their companies that is lost when they solely hold a financial participation in the firm. Finally, our results also show that these skills are not confined to the founder but are also present in heir-managed family firms. In particular we find that firms with descendant-CEO or founders acting as Chairman have better accounting and market performances.

Using a very large dataset that spans the period 1996 to 2007 and contains transaction prices for all reported auctions at the Chicago Wine Company, we analyze how the prices of high-end wines have evolved over the last decade. We characterize the returns for different wine categories and show that characteristics like vintage, rating and ranking have an impact not only on the pricing of wines but also on their subsequent returns. The best wines according to these characteristics earn higher returns and tend to have either a lower or a similar variance than less good wines. Nevertheless, the different categories of wines seem to follow a similar trend over the long run. This essentially means that the market for Bordeaux wines is not segmented. To address the issue of diversification, we consider a realistic setting that accounts for covariance between equities and wines and also for coskewness and cokurtosis. We employ a polynomial goal programming model to investigate how investor preferences affect the portfolio allocation and the return distribution. Wine returns are only slightly correlated with other assets and as such they can be used to reduce the risk of an equity portfolio. Wines look even more attractive when the investor also has concerns about the skewness of his portfolio. However, the part to be invested in wines is reduced if we include the kurtosis into the analysis. Finally, it seems advisable to diversify across the range of wine categories as their moves in the short-run are partially independent of each other. First growths and wines rated as extraordinary by Robert Parker deliver the best tradeoff in terms of portfolio expected returns, variance, skewness and kurtosis for most investor preference settings considered.