Eric Le Fur

This article is a discussion of the concept of index-based agricultural insurance and the possible role of real options to reduce the basic risk. Indeed, to address the consequences of variability of weather within climate, experiments based on indexed agricultural insurance have been implemented in recent years. However, this locally-defined insurance scheme has a weak point called the basic risk, i.e. the difference between the reality of climatic shocks and the payment of compensation. Real options allow filling this gap by offering alternatives to farmers. This article is the first to discuss the use of real options in the basic risk management of index-based climate agricultural insurance. The implications for farmers in developing countries, insurers and local and institutional organizations and communities are important: better management of operating conditions, optimized financial management, and consideration of real climatic conditions.

The goal of this paper is to explore volatility transmission from various markets to the fine wine market. Knowledge of these channels for transmitting volatility to the wine market allows practitioners to anticipate the future volatility and the consequences of a shock on the wine market, to develop their investment strategy and diversify their risk. We especially analyse the impact of U.S. markets (i.e. art, commodities, credit, financial and real estate) during the 2007–2017 period. We shed additional light on how the volatility of the fine wine market varies during an extended period including a financial crisis. Our results indicate that, in the short-term, volatility is transmitted with a negative effect through the financial and commodity markets and with a positive effect through the art, residential real estate, and credit default markets. In the long-term, the wine market is impacted by all other markets. We show that correlations are time-varying.

Keywords
ADCC-GARCHAlternative assetCollectiblesFinancial marketsVolatilityWine

The dispersion of prices on the fine wines market raises the issue of the wine price index construction and valuation of wine funds. In this paper, we first propose an extended hedonic function to better control good heterogeneity (which is a major source of price dispersion) by encoding auction experts’ comments about the state of preservation of the bottles. Second, we use a multiplicative heteroscedastic model to identify the attributes providing the most price dispersion. Outcomes allow for defining the relevant components of wine price hedonic function, and spurs data providers to develop the information on wine products. This result might be useful for professionals willing to improve their fine wine valuation process and then would improve the fine wines market efficiency.

Abstract

This study addresses the price heterogeneity of the five first growths of Bordeaux. We apply the quantile regression (QR) approach with market segmentation based on wine bottle price quantiles. We compute the hedonic price of wine attributes for various price segments in the market. This approach is applied to a major dataset comprising approximately 50,000 transactions over the 2003–2017 period. The findings indicate that the relative hedonic prices of several wine attributes differ significantly among deciles. The implications of our results are manifold. Vintage and Parker grades have a strong impact on the variation in wine prices, and there is a hierarchy among the five first growths of Bordeaux. There is also a premium commanded by the reputation and experience of an auction house. Since the financial crisis of 2012–2013, investors have considered that the five first growths are overrated, save for the most expensive wines; for those most expensive ones, investors prefer scarcity to liquidity. These results are of import to several actors in the fine wine market: investors, for example, could use the findings herein to better diversify their wine portfolio, while auction houses could better anticipate their future sales based on consumers’ expectation.

The dispersion of prices on the fine wines market raises the issue of the wine price index construction and valuation of wine funds. In this paper, we first propose an extended hedonic function to better control good heterogeneity (which is a major source of price dispersion) by encoding auction experts’ comments about the state of preservation of the bottles. Second, we use a multiplicative heteroscedastic model to identify the attributes providing the most price dispersion. Outcomes allow for defining the relevant components of wine price hedonic function, and spurs data providers to develop the information on wine products. This result might be useful for professionals willing to improve their fine wine valuation process and then would improve the fine wines market efficiency.

The objective of the paper is to investigate whether the grape varieties most used in national production affect the export performance. We examine this relationship over the period 1995-2016. The analysis is based on a sample of 38 wine exporting countries. We use the Data Envelopment Analysis (DEA) to compute the efficiency of wine exports if the market structure of grape varieties is an input decision unit. Our results show that only a few countries are efficient. The three largest exporters, France, Italy and Spain, are efficient and adopt a strategy of diversification with a relatively small share of their most planted varieties in the national production. Some New World countries (Argentina, Portugal, South Africa, United States) and the Old World (Germany) adopt the same strategy. Australia and Chile are also efficient but adopt a strategy based on a small number of grape varieties as well as a large share of the national production made with a few grape varieties. The implications for the wine industry are then discussed.

The purpose of this paper is to investigate the main factors and mechanisms that govern the price of cider, and to apply the analysis to the price of ciders in the Province of Québec, Canada. The analysis is following the methodology applied to the determinants of the price of wine. A model for the price of cider is estimated with 70 prices representing five regions and five types of products. The analysis is limited to one geographical factor, i.e. the region of origin and factors related to the producer, i.e. the age and the size of the firm. The results conclude on the importance of geographical factors related to the region of origin. The relationship between the price of ciders and the region of origin is statistically significant at the 1 percent level for two regions and shows a high premium for ciders produced in these two regions. Production factors related to the age and the size of the production unit although showing the expected sign are not statistically significant to conclude on the impact. There is a small premium for producing effervescent cider compared to still or rosé cider but the most statistically significant results at a 1 percent level are for ice ciders and fortified ciders which are two typical products from Québec. The analysis has important potential implications on the role of certification of origin. Cider regions in Québec, Canada have recently defined quality standards applied to specialties like Ice cider and Fire ciders. The choice of high quality products is reflected in the premium associated to the price of these products. Contrary to the wine sector, there is a lack of research and literature on the determinants of the price of ciders. This study is the first to propose a pricing model to examine some of the determinants of prices.

This article examines the short- and long-run linkages among art market indexes between 1998 and 2016 using cointegration procedures, the Granger noncausality test and the Error Correction Model. These art indexes are examined by category: global, art method, time, and currency/country. The results indicate that there are a few causal linkages between art market indexes, notably that there is feedback between a few markets. These moderate causal links between art market indexes would indicate that there are many opportunities for diversification for practitioners, investors and collectors.

This paper provides a critical review of research on fine wine returns issues. To date, no review article has assessed the various findings of studies analyzing the benefits of wine investment in the context of portfolio diversification. In the recent past years, the quantity and variety of work have increased dramatically. The paper reviews investments in fine wine assets in a mixed-asset portfolio strategy or in a wine-only portfolio context. The paper also addresses the question of price dynamics based on cointegration and contagion effects, i.e., the role of the market and under what conditions it can explain the differences between the prices of different wines.

This paper tests the stability of the main hedonic wine price coefficients over time. We draw on an extensive literature review to identify the most frequently used methodology and define a standard hedonic model. We estimate this models on monthly subsamples of a worldwide auction database of the most commonly exchanged fine wines. This provides, for each attribute, a monthly time series of hedonic coefficients time series data from 2003 to 2014. Using a multivariate autoregressive model (MAR), we then study the stability of these coefficients over time and test the existence of structural or cyclical changes related to fluctuations in general price levels. We find that most hedonic coefficients are variable and exhibit either structural or cyclical variations over time. These findings shed doubt on the relevance of both short-run and long-run hedonic estimations.

This paper examines the strong version of the law of one price (LOOP) on the auction market for fine wine. We draw on worldwide auction prices from eight auction houses,1 covering the time period from 2000 to 2012. Employing a hedonic approach, we find significant price premiums in particular in Hong Kong and between auction companies (independent of their locations). The price premiums by far exceed the expected transaction costs, casting doubt on the existence of the strong version of LOOP in the fine wine market. Our results suggest that heterogeneity in buyer preferences may crucially contribute to the observed price dispersion. In particular, although wines suspected of being counterfeits are sold at discounts in Western markets, they fetch price premiums in Hong Kong.

Abstract

Using an asymmetric dynamic conditional correlations (ADCC) generalised auto-regressive conditional heteroskedacity (GARCH) framework, the present study explores the possible contagion effects between financial and the fine wines markets during the period of 2003 to 2014. Our results are manifold. Firstly, we demonstrate that the different wine indices are not affected in the same way by financial market volatility. Secondly, it seems that the choice of the financial index selected strongly influences the identification of the contagion effects. Thirdly, we emphasise a proximity or regional effect mediating the contagion transmission of financial market volatility to fine wines indices. Finally, our study reinforces the possible alternative asset nature of fine wines.

Abstract

L’article s’intéresse à la localisation géographique des ménages détenteurs de hauts patrimoines, considérés comme une nouvelle cible des politiques d’attractivité des territoires. L’étude est menée à partir d’une base de données géolocalisées des ménages assujettis à l’impôt de solidarité sur la fortune (ISF) et des caractéristiques géographiques et socioéconomiques des départements français (base INSEE). En spécifiant un modèle Durbin spatial, nous avons étudié les liens entre les dimensions obtenues par l’analyse factorielle des caractéristiques des départements et les variables ISF en tenant compte d’éventuelles autocorrélations spatiales. Les résultats montrent une forte attractivité des territoires les plus urbanisés, une faible répulsivité des territoires en crise et l’absence d’attractivité des territoires
touristiques.

Abstract

This article uses hammer prices from five global auction houses to analyse the price premium Bordeaux fine wine yielded at Hong Kong wine auctions.We find that fine wine was on average sold at a 19% premium in Hong Kong. We further observe that the Hong Kong premium is not uniform and most pronounced for wines with perfect Parker scores and the most powerful brands. The premium has declined throughout the sample period from 60% in 2008 to a level of 15% since 2012. This can be attributed to the increase in knowledge on fine wine by Chinese customers.

Abstract

This article examines short- and long-term price linkages among the majority of fine wine and equity markets over the period of 2003 to 2012. We do notconsider the price index (LIV-EX 100 or 500), as is typically undertaken in previous studies, but rather examine the auction price series of the world’s most traded wine-vintage pairs (5 Bordeaux first growth, 8 Bordeaux second growth, 5 Burgundy, 3 Rhone, 4 Italian, 5 Californian, 1 Australian and 1 Portuguese). A global equity index is also included using theMorgan Stanley Capital InternationalWorld. Cointegration procedures, the Granger non-causality test, and ECM are used to analyse short- and long-run relationships among these markets. The results indicate a strong effect of financial markets on wine prices and short-term causality for certain wines. Moreover, the findings indicate short-run causality between the wines themselves, revealing a leader (exogenous) or follower (endogenous) status of certain fine wines in price dynamics, and also long-run causality for endogenous wines. This approach is relevant to portfolio diversification strategies and allows price movements to be anticipated more accurately than using an index approach.

This article examines short- and long-term price linkages among the majority of fine wine and equity markets over the period of 2003 to 2012. We do not consider the price index (LIV-EX 100 or 500), as is typically undertaken in previous studies, but rather examine the auction price series of the world’s most traded wine-vintage pairs (5 Bordeaux first growth, 8 Bordeaux second growth, 5 Burgundy, 3 Rhone, 4 Italian, 5 Californian, 1 Australian and 1 Portuguese). A global equity index is also included using the Morgan Stanley Capital InternationalWorld. Cointegration procedures, the Granger non-causality test, and ECM are used to analyse short- and long-run relationships among these markets. The results indicate a strong effect of financial markets on wine prices and short-term causality for certain wines. Moreover, the findings indicate short-run causality between the wines themselves, revealing a leader (exogenous) or follower (endogenous) status of certain fine wines in price dynamics, and also long-run causality for endogenous wines. This approach is relevant to portfolio diversification strategies and allows price movements to be anticipated more accurately than using an index approach.

Demande internationale en hausse, croissance du bio et percée du rosé… Eric Le Fur, enseignant-chercheur à l’INSEEC dans le domaine de l’économie du vin, analyse les bouleversements en cours dans le secteur viticole, domaine stratégique pour l’économie française.

In this paper, the validity of information provided by hedonic index on collectible markets is questioned through the price dispersion issue. A very current issue indeed, while wealthy households and specific investment funds included more and more collectibles in their portfolio. However, hedonic analysis (Rosen, 1974) implies two successive steps: the first one estimates the implicit prices of a finite number of attributes while the second one regresses these implicit prices on buyers’ characteristics to estimate bid functions taking account of possible market segmentations. Yet hedonic literature on collectible (specifically in auction markets) fails to consider whole the attributes and buyers’ preferences needed to run a complete hedonic analysis. Consequently, a unspecified (good and agent) heterogeneity generates a price dispersion and biases the information provided by hedonic indices. Without buyer’s information provided by auction houses according to their non-disclosure agreements, we are only able to produce some back door solution to improve the market efficiency. We first propose an extended hedonic function to better control good heterogeneity by using auction expert comments. Then we attempt to identify the attributes which provide the most dispersion according to their difference of valuation. A multiplicative heteroscedastic model is used in this way. Overall, this contribution provides a key reference to define the relevant components of wine price hedonic function and spurs data providers to develop the information on wine product and to specify the origin of buyers for raising the explanatory power of our hedonic models.

This paper tests the stability of the main hedonic wine price coefficients over time. We draw on an extensive literature review to identify the most frequently used methodology and define a standard hedonic model. We estimate this models on monthly subsamples of a worldwide auction database of the most commonly exchanged fine wines. This provides, for each attribute, a monthly time series of hedonic coefficients time series data from 2003 to 2014. Using a multivariate autoregressive model (MAR), we then study the stability of these coefficients over time and test the existence of structural or cyclical changes related to fluctuations in general price levels. We find that most hedonic coefficients are variable and exhibit either structural or cyclical variations over time. These findings shed doubt on the relevance of both short-run and long-run hedonic estimations.