On Fine Wine Pricing across Different Trading Venues

Abstract

This article examines how selected attributes of Bordeaux fine wines (producer, vintage, quality, bottle size, case, flaws, and transaction volume) affect prices in three types of trading venues: auctions, electronic exchange, and the over-the-counter (OTC) market. The findings indicate a price differentiation across the venues. Wine aging leads to relatively higher prices at auctions than on the electronic exchange or the OTC. There is a nearly linear relationship between prices and wine ratings, the strongest of which is found in the case of auctions. The bottle size effect is mostly positive for supersized formats and is the strongest on an electronic exchange and the weakest at auctions. The transaction volume negatively affects wine prices in all the trading venues. The simulation results facilitate the construction of more realistic trading models and may help traders make more informed decisions on the choice of a trading venue, depending on the wine characteristics. (JEL Classifications: D40, G12, Q14, L66)

Left, right, or both? Long-run returns from Bordeaux

“…Table 2 Other effects, which are omitted from the table for brevity of presentation, are consistent with expectations: nonstandard bottle sizes trade at a significant premium; prices are significantly higher during the fourth quarter; and wines sold as futures trade at a small discount (e.g., Oleksy, Czupryna, and Jakubczyk, 2021). Figure 1 illustrates the estimated relationship between aging and prices.…”

“…Price and production quantity are clearly not perfectly correlated: Lafite is the biggest, while Haut Brion and Cheval Blanc are among the smallest. Other effects, which are omitted from the table for brevity of presentation, are consistent with expectations: nonstandard bottle sizes trade at a significant premium; prices are significantly higher during the fourth quarter; and wines sold as futures trade at a small discount (e.g., Oleksy, Czupryna, and Jakubczyk, 2021).…”

Correlation Between Stock Returns of Wine Corporations and Weather Conditions

“…If we choose a specific region in the North American wine market as a baseline, fine wines that come from France are sensitive to prices and can be sold at a premium, whereas others coming from other countries have almost no difference in price level [3]. A recent study examines the impact of different trading venues on wine prices; the characteristics of Bordeaux fine wines have various responses to affect transaction prices across three trading venues, which are auctions, electronic exchange market, and the OTC market [5].…”

“…Wines are also analyzed in the macroeconomic environment. A study [5], for example, sheds light on macroeconomic factors of wine market pricing, such as real interest rates, the money supply, and the proportion of investment funds in GDP. Except for commodities in the industry, wines unfold many attributes of an investment.…”

Effect of Online Collective Intelligence in Wine Industry: Focus on Correlation between Wine Quality Ratings and On-Premise Prices

“…However, in the wine industry, traditionally and absolutely, many practitioners and academicians believed and reported that professional wine critics' wine grades, namely Robert Parker's wine scores, affect the market's wine prices and consumers' wine choices. Robert Parker's ratings effect on price and customer purchase behaviors are well documented in this industry [12][13][14][15][16][17]. In this regard, in the wine industry, we cannot insist that Collective Intelligence has overpowered wine critics in respect to knowledge and power for wine evaluation and price effect.…”