Behavioural heterogeneity in wine investments

Adrian Fernandez-Perez; Bart Frijns; Alireza Tourani-Rad; Jean-Philippe Weisskopf

doi:10.1080/00036846.2019.1566686

Behavioural heterogeneity in wine investments

Adrian Fernandez-Perez^*, Bart Frijns, Alireza Tourani-Rad, Jean-Philippe Weisskopf

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

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Abstract

We introduce a heterogeneous agent model to explain the dynamics of fine wine investments. 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 wine index values in the recent past. This switching behaviour can explain the large variations in index values (bubbles and crashes) that are observed in the fine wine market.

Original language	English
Pages (from-to)	3236-3255
Number of pages	20
Journal	Applied Economics
Volume	51
Issue number	30
DOIs	https://doi.org/10.1080/00036846.2019.1566686
Publication status	Published - 27 Jun 2019
Externally published	Yes

Keywords

ART
BORDEAUX WINE
BUBBLES
EXUBERANCE
FINE WINE
Heterogeneous agent models
MARKET
OIL
PRICE DISPERSION
QUALITY
SPECIFICATION
Wine investments
behavioural finance

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10.1080/00036846.2019.1566686

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title = "Behavioural heterogeneity in wine investments",

abstract = "We introduce a heterogeneous agent model to explain the dynamics of fine wine investments. 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 wine index values in the recent past. This switching behaviour can explain the large variations in index values (bubbles and crashes) that are observed in the fine wine market.",

keywords = "ART, BORDEAUX WINE, BUBBLES, EXUBERANCE, FINE WINE, Heterogeneous agent models, MARKET, OIL, PRICE DISPERSION, QUALITY, SPECIFICATION, Wine investments, behavioural finance",

author = "Adrian Fernandez-Perez and Bart Frijns and Alireza Tourani-Rad and Jean-Philippe Weisskopf",

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doi = "10.1080/00036846.2019.1566686",

language = "English",

volume = "51",

pages = "3236--3255",

journal = "Applied Economics",

issn = "0003-6846",

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T1 - Behavioural heterogeneity in wine investments

AU - Fernandez-Perez, Adrian

AU - Frijns, Bart

AU - Tourani-Rad, Alireza

AU - Weisskopf, Jean-Philippe

PY - 2019/6/27

Y1 - 2019/6/27

N2 - We introduce a heterogeneous agent model to explain the dynamics of fine wine investments. 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 wine index values in the recent past. This switching behaviour can explain the large variations in index values (bubbles and crashes) that are observed in the fine wine market.

AB - We introduce a heterogeneous agent model to explain the dynamics of fine wine investments. 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 wine index values in the recent past. This switching behaviour can explain the large variations in index values (bubbles and crashes) that are observed in the fine wine market.

KW - ART

KW - BORDEAUX WINE

KW - BUBBLES

KW - EXUBERANCE

KW - FINE WINE

KW - Heterogeneous agent models

KW - MARKET

KW - OIL

KW - PRICE DISPERSION

KW - QUALITY

KW - SPECIFICATION

KW - Wine investments

KW - behavioural finance

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DO - 10.1080/00036846.2019.1566686

M3 - Article

SN - 0003-6846

VL - 51

SP - 3236

EP - 3255

JO - Applied Economics

JF - Applied Economics

IS - 30

ER -

Behavioural heterogeneity in wine investments

Abstract

Keywords

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