Are there bubbles in wine ?

Fernandez-Perez, Adrian (Auckland University of Technology, New Zealand) ; Frijnsa, Bart (Auckland University of Technology, New Zealand) ; Tourani-Rada, Alireza (Auckland University of Technology, New Zealand) ; Weisskopf, Jean-Philippe (Ecole hôtelière de Lausanne, HES-SO // University of Applied Sciences Western Switzerland)

We introduce a heterogeneous agent model to explain the price dynamics of fine wine. Our results show evidence of the existence of both fundamentalists – those who trade on mean-reversion towards a fair value – and chartists – those who extrapolate recently observed price trends – in the wine market. Moreover, we document that market participants switch between the two trading strategies, allocating more weight to the strategy that has been the most accurate in forecasting prices in the recent past. This switching behaviour can explain the large price variations (bubbles and crashes) that are observed in the fine wine market. Specifically, we document that large positive or negative deviations from fair values coincide with the majority of investors trading on the basis of a chartist belief. Further analysis reveals that switching behaviour (and thus bubble-like behaviour) is most prominent among wines that are popular with speculative traders.

Type de conférence:
full paper
Economie et Services
EHL Ecole hôtelière de Lausanne
Adresse bibliogr.:
Padua, Italy, 28 June – 2 July 2017
Padua, Italy
28 June – 2 July 2017
43 p.
Publié dans
Proceedings of the 11th Annual American Association of Wine Economists (AAWE) Conference 2017
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 Notice créée le 2017-10-27, modifiée le 2018-08-31

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