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Why have Bordeaux wine prices become so difficult to forecast ?

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  • Stephen Bazen

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Jean-Marie Cardebat

    (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)

Abstract

In an earlier article, we found that a univariate state space time series model estimated using the Kalman filter provided reasonably accurate monthly forecasts of generic Bordeaux red wine prices for the period up to 2016. We use the same model to forecast prices for the period 2017 to 2020, a period in which the market for this wine was subject to a number of demand and supply shocks. We find that the model's forecasts are poor from late 2018 through 2019 when the price collapsed from an all-time high and returned levels not seen since 2012. There is evidence of a structural break or regime change, and we explore the underlying reasons for this. The main one is the collapse in Chinese demand for Bordeaux wines which was brought about by a combination of shocks.

Suggested Citation

  • Stephen Bazen & Jean-Marie Cardebat, 2022. "Why have Bordeaux wine prices become so difficult to forecast ?," Post-Print hal-03603071, HAL.
    • Handle: RePEc:hal:journl:hal-03603071
    Note: View the original document on HAL open archive server: https://hal.science/hal-03603071
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    References listed on IDEAS

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    1. Bargain, Olivier, 2020. "French Wine Exports to China: Evidence from Intra-French Regional Diversification and Competition," Journal of Wine Economics, Cambridge University Press, vol. 15(2), pages 134-162, May.
    2. B. Faye & E. Le Fur & S. Prat, 2015. "Dynamics of fine wine and asset prices: evidence from short- and long-run co-movements," Applied Economics, Taylor & Francis Journals, vol. 47(29), pages 3059-3077, June.
    3. Cardebat, Jean-Marie & Faye, Benoît & Le Fur, Eric & Storchmann, Karl, 2017. "The Law of One Price? Price Dispersion on the Auction Market for Fine Wine," Journal of Wine Economics, Cambridge University Press, vol. 12(3), pages 302-331, August.
    4. Maurer, Frantz & Cardebat, Jean-Marie & Jiao, Linda, 2020. "Looking Beyond Wine Risk-Adjusted Performance," Journal of Wine Economics, Cambridge University Press, vol. 15(2), pages 229-259, May.
    5. Stephen Bazen & Jean-Marie Cardebat, 2018. "Forecasting Bordeaux wine prices using state-space methods," Applied Economics, Taylor & Francis Journals, vol. 50(47), pages 5110-5121, October.
    6. Eric Le Fur & Hachmi Ben Ameur, 2020. "Volatility transmission to the fine wine market," Post-Print hal-03431283, HAL.
    7. Eric Le Fur & Jean-François Outreville, 2019. "Fine wine returns: a review of the literature," Journal of Asset Management, Palgrave Macmillan, vol. 20(3), pages 196-214, May.
    8. Ben Ameur, Hachmi & Le Fur, Eric, 2020. "Volatility transmission to the fine wine market," Economic Modelling, Elsevier, vol. 85(C), pages 307-316.
    9. Cardebat, Jean-Marie & Jiao, Linda, 2018. "The long-term financial drivers of fine wine prices: The role of emerging markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 347-361.
    10. Fogarty, James J. & Sadler, Rohan, 2014. "To Save or Savor: A Review of Approaches for Measuring Wine as an Investment," Journal of Wine Economics, Cambridge University Press, vol. 9(3), pages 225-248, December.
    11. Adeline Alonso Ugaglia & Jean-Marie Cardebat & Alessandro Corsi (ed.), 2019. "The Palgrave Handbook of Wine Industry Economics," Springer Books, Springer, number 978-3-319-98633-3, December.
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    Cited by:

    1. Algieri, Bernardina & Iania, Leonardo & Leccadito, Arturo & Meloni, Giulia, 2023. "Message in a Bottle: Forecasting wine prices," LIDAM Discussion Papers LFIN 2023004, Université catholique de Louvain, Louvain Finance (LFIN).

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    JEL classification:

    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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