Purpose
The purpose of this paper is to identify the macroeconomic determinants of fine-wine prices and estimate their impacts.
Design/methodology/approach
The author models the Liv-ex fine-wine price indices with the macroeconomic variables of emerging and developed markets on a monthly basis from 1996 to 2015.
Findings
The demand from emerging markets plays a key role in fine-wine pricing and, more precisely, in the price fluctuation of prestige Bordeaux wines. Furthermore, the continuous weakening of the US dollar in real terms favors an increase in fine-wine prices. Since 2011, the slowdown in economic growth in emerging markets, followed by the depreciation of national currencies, has negatively affected the luxury wine market. Along with the process of financialization in the fine-wine market, prices have become more volatile. Factors such as money supply, real interest rates and the growth of investment funds have started to show their influence on fine-wine pricing.
Originality/value
Complementary to the hedonic price modeling, this research can provide an analysis to wine-price modeling and forecasting within the macroeconomic approach.
In this paper, we use copula-GARCH models applied to daily data from March 2010 to March 2018 to test the time-varying dependence of the Liv-ex 50, a secondary market fine wine index comprised of the ten most recent vintages of the five Bordeaux First Growths, with a portfolio composed of the six main stock markets (S&P 500, CAC 40, DAX 30, FTSE 100, and Hang Seng). Our results suggest that the Liv-ex 50 underperforms the six stock indexes, but provides diversification benefits in terms of volatility, asymmetry, and extreme events. (JEL Classifications: G110, G120, Q14)
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