Is Wine a Financial Parachute?

This paper analyzes the relationship between Global Wine Industry Share Price Indexes and composite stockmarket indexes using a Threshold Vector Error Correction Model (TVECM), aiming to investigate if investmentsin the wine sector play a role in determining financial risk and return to investors who include it in theirportfolio. Whilst in most of the literature analyses the return of investments of fine wine, this paper places thefocus to “normal” (i.e. non‐fine) wine, using data from the Mediobanca database covering companies in thewine industry listed on regulated stock market in France, US, Australia, Chile and China . The dataset cover thetime period going from January 1, 2001, to the end of February 2009.The estimates of the TVECM lead to the following results: i) in more mature markets, like France and the US, thepresence of a threshold in the relationship between wine index and composite index permit informed investorsto make gainful investments; ii) in less mature markets, like Chile and China, there is evidence suggest that wineis not used as a financial parachute.