Wine prices outperformed art, stamps and bonds throughout 20th century

May 22, 2014
Credit: Derek Gavey

New research reveals that investors who have so far left wine out of their portfolio may want to think again.

Canny investors who have so far left out of their portfolio may want to think again after the most comprehensive study of the price of wine to date revealed that wine prices outperformed government bonds, art and stamps, and remained consistently on a par with stock market returns, throughout the 20th century.

Using a huge dataset of 36,000 prices between 1899 and 2012 from Christie's and Berry Bros, a real financial return on investment of 4.1 per cent emerges from the study co-authored by Professor Elroy Dimson of the University of Cambridge Judge Business School.

The study also found that great vintages rose quickly in value during the first couple of decades, while wines from mediocre or poor vintages caught up with the great ones after 50 years.

The Price of Wine, by Dimson, Peter L. Rousseau (Vanderbilt University), and Christophe Spaenjers (HEC Paris) makes a unique contribution to the study of the economics of wine, built on a novel historical database of prices for five Premiers Crus Bordeaux that have consistently ranked among the most frequently-traded in the world – Haut-Brion, Lafite-Rothschild, Latour, Margaux, and Mouton-Rothschild.

The trio examined 36,271 prices for over 9,492 combinations of sale year, chateau, vintage and transaction type (dealer or auction) between 1899 and 2012 to investigate the returns on holding wine and the effects of aging on wine prices. They found that keeping wine characteristics constant, wine prices have risen at an annualized rate of 2.9 per cent in real GBP terms over the period 1900-2012. Young high-quality wines, that are still maturing, provided the highest financial return, while famous wines delivered a quantifiable psychic dividend to owners.

Annualised real returns over the period 1900–2012 were 2.4 per cent, 2.8 per cent, 5.2 percent, for art, stamps and equities respectively. Wine not only outperformed government bonds, but also art and stamps, even when ignoring the costs associated with investments in those types of collectibles, and only underperformed equities.

A price history for the five wines listed above was created, starting in 1899 and based on prices realised at auctions in the London sales rooms of Christie's, and retail list prices at Berry Bros. & Rudd (BBR), a London dealer of wines and spirits. At least until the First World War the majority of the best Bordeaux wines were sold to British buyers, so the long tradition of auctioning wines makes Christie's in particular a unique source of information. The analysis focused on homogenous lots and prices per bottle.

For the lowest-quality vintages, increase little over the first few years of the life cycle, but rise afterwards in a near-linear fashion. In contrast, the highest-quality wines appreciate strongly while they are maturing over three to four decades after the vintage – an estimated average price appreciation of 2.7 per cent over the first 40 years. Prices stabilise once high-quality wines fully mature, and their increase in value between age 40 and 80 is very limited. As the wines become antiques, new price increases emerge.

"Not surprisingly, the relative difference in price levels between high-quality and low-quality vintages is smaller for very old wines than for young wines, given that consumption quality slowly becomes irrelevant and the 'psychic dividend' of owning the wine takes over," said Dimson.

Maturing wines enjoy the highest returns: a collectible – but not necessarily drinkable – wine worth 100 GBP 'pays' a non-financial dividend of 0.7 GBP to its owner over the course of a year. Overall, researchers found an annualised real return of 5.3 per cent between 1900 and 2012, but adjustment for the insurance and storage costs incurred by wine investors lower the estimated return to 4.1 per cent.

Explore further: Science finds wines' fruity flavors fade first

More information: The report, "The Price of Wine," is available online:… he-Price-of-Wine.pdf

add to favorites email to friend print save as pdf

Related Stories

Science finds wines' fruity flavors fade first

May 05, 2014

Testing conventional wisdom with science, recently published research from Washington State University reveals how different flavors "finish," or linger, on the palate following a sip of wine.

Service is key to winery sales

Mar 07, 2014

To buy, or not to buy? That is the question for the more than 5 million annual visitors to New York's wineries. Cornell University researchers found that customer service is the most important factor in boosting tasting room ...

Advice for bag-in-box wine drinkers: Keep it cool

Dec 05, 2012

Bag-in-box wines are more likely than their bottled counterparts to develop unpleasant flavors, aromas and colors when stored at warm temperatures, a new study has found. Published in ACS' Journal of Agricultural an ...

Recommended for you

Local education politics 'far from dead'

21 hours ago

Teach for America, known for recruiting teachers, is also setting its sights on capturing school board seats across the nation. Surprisingly, however, political candidates from the program aren't just pushing ...

First grade reading suffers in segregated schools

21 hours ago

A groundbreaking study from the Frank Porter Graham Child Development Institute (FPG) has found that African-American students in first grade experience smaller gains in reading when they attend segregated schools—but the ...

Violent aftermath for the warriors at Alken Enge

21 hours ago

Denmark attracted international attention in 2012 when archaeological excavations revealed the bones of an entire army, whose warriors had been thrown into the bogs near the Alken Enge wetlands in East Jutland ...

Why aren't consumers buying remanufactured products?

23 hours ago

Firms looking to increase market share of remanufactured consumer products will have to overcome a big barrier to do so, according to a recent study from the Penn State Smeal College of Business. Findings from faculty members ...

Expecting to teach enhances learning, recall

23 hours ago

People learn better and recall more when given the impression that they will soon have to teach newly acquired material to someone else, suggests new research from Washington University in St. Louis.

User comments : 0