What CAGR, drawdown and volatility mean for wine

CAGR

Compound annual growth rate: (end ÷ start) to the power of (1 ÷ years), minus one. A wine released at $100 and worth $300 twelve years later has a CAGR of about 9.6%: not $200 ÷ 12 years, because growth compounds. Corkonomics only annualises spans of a year or more; a two-month move is shown as a simple change so it is never inflated into a fake annual rate.

Real return

Prices rise partly because money is worth less. The real CAGR removes inflation using the US consumer price index, so a wine that rose 3% a year while prices rose 3% a year has a real return of about zero.

Drawdown

The largest fall from a previous high. A wine that went from $100 to $250 to $150 to $300 has a maximum drawdown of −40% (the fall from $250 to $150), even though it ended higher than it started. Drawdown tells you what holding the wine would have felt like at the worst moment, and whether a forced sale would have hurt.

Volatility

The standard deviation of the changes between observations, scaled to a year. High volatility means the price bounced around; low means it moved smoothly. Corkonomics computes it only when there are at least eight observations, because a number from three points means nothing.

What they leave out

All three are computed on prices. None includes the buyer's premium, the seller's commission, storage or insurance, which is why the benchmarks page shows a net-of-costs illustration beside the gross.