Liquid assets outperform Russell 3000 Index

Tue Mar 30, 2010 9:40am EDT
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By Leslie Gevirtz

NEW YORK (Reuters Life!) - Investing in wine, not just top Bordeaux but even cheap varieties, can be good for your total portfolio and is especially useful during a financial crisis, according to two Swiss economists.

"Wine in a portfolio has produced higher returns and lower risks than the Russell 3000 equity index ... Especially in times of economic downturns" they said in a report in the American Association of Wine Economists.

The study comes as leading auction houses reported sales of fine wines totaling more than $12 million in the last two weeks.

Economists Philippe Masset, of Lausanne Hotel School, and Jean-Philippe Weisskopf, of the University of Fribourg, both in Switzerland, looked at auction prices from The Chicago Wine Company from January 1996 through January 2009.

"In a nutshell, our findings show that the inclusion of wine in a portfolio and, especially more prestigious wines, increases the portfolio's returns while reducing its risk, particularly during the financial crisis," they explained.

"This is true for all model-portfolios both during bull and bear periods."

Masset and Weisskopf accumulated data from 144 auctions with a turnover exceeding $237 million and covered a period that included two significant economic booms and downturns.

They also constructed several indices using the repeat-sale regression method, an approach used by the economists who created the S&P/Case-Shiller Home Price Indices that are used to track and forecast home prices in the United States.   Continued...

<p>Bottles of wine, one costing nearly $460, are shown in a wine shop in San Francisco, California January 14, 2008. REUTERS/Robert Galbraith</p>