Baijiu as an alternative investment: The financial performance of the world’s most consumed spirit

• Baijiu shows high returns and low correlations with traditional financial assets. • Brand, vintage, and packaging significantly affect Baijiu auction prices. • Listed Baijiu stocks offer a more efficient investment than physical bottles. • Baijiu provides diversification but carries high volatility and low liquidity. This study examines the potential of Baijiu, a traditional Chinese grain-based spirit and the world’s most widely consumed liquor, as an investment opportunity. While Baijiu is primarily consumed, high-end varieties have recently gained traction in secondary markets, signalling a shift towards financialisation. Using a unique dataset containing 20,035 auction lots from 2010 to 2023, we employ hedonic regression models to identify the key price drivers and create Baijiu and Moutai price indices. Our findings suggest strong long-term returns and low correlations with traditional financial assets, thus supporting the notion of using Baijiu to diversify a portfolio. However, its high volatility and illiquidity contrast with the stronger efficiency of Baijiu-related stocks. By analysing this culturally significant non-Western luxury product, the paper contributes to the literature on alternative assets, offering stakeholders insights into the intersection of cultural consumption and investment.