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An Examination of Tail Dependence in Bordeaux Futures Prices and Parker Ratings

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  • Cyr, Don
  • Kwong, Lester
  • Sun, Ling

Abstract

This paper explores the nonlinearities of the bivariate distribution of Bordeaux en primeur, or wine futures, prices and Parker “barrel ratings†for the period of 2004 through 2010. In particular, copula-function methodology is introduced and employed to examine the nature of the bivariate distribution. Our results show a significant nonlinear relationship between Parker ratings and wine prices, characterized by significant positive tail dependence and higher correlation between high ratings and high prices. Marginal distributions for Parker ratings and wine prices are then identified and Monte Carlo simulation is employed to operationalize the relationship for risk-management purposes. (JEL Classifications: C19, G13, L66)

Suggested Citation

  • Cyr, Don & Kwong, Lester & Sun, Ling, 2017. "An Examination of Tail Dependence in Bordeaux Futures Prices and Parker Ratings," Journal of Wine Economics, Cambridge University Press, vol. 12(3), pages 252-266, August.
    • Handle: RePEc:cup:jwecon:v:12:y:2017:i:03:p:252-266_00
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    Cited by:

    1. Simona Franzoni & Cristian Pelizzari, 2021. "Rainfall option impact on profits of the hospitality industry through scenario correlation and copulas," Annals of Operations Research, Springer, vol. 299(1), pages 939-962, April.
    2. Gergaud, Olivier & Ginsburgh, Victor & Moreno-Ternero, Juan D., 2021. "Wine Ratings: Seeking a Consensus among Tasters via Normalization, Approval, and Aggregation," Journal of Wine Economics, Cambridge University Press, vol. 16(3), pages 321-342, August.

    More about this item

    JEL classification:

    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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