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Forecasting bulk prices of Bordeaux wines using leading indicators

Author

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  • Emmanuel Paroissien

    () (SMART - Structures et Marché Agricoles, Ressources et Territoires - AGROCAMPUS OUEST - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRA - Institut National de la Recherche Agronomique, LAREFI - Université de Bordeaux, CREST-LEI - ENPC - École des Ponts ParisTech)

Abstract

Agricultural price forecasting has been being abandoned progressively by researchers ever since the development of large-scale agricultural futures markets. However, as with many other agricultural goods, there is no futures market for wine. This paper draws on the agricultural prices forecasting literature to develop a forecasting model for bulk wine prices. The price data include annual and monthly series for various wine types that are produced in the Bordeaux region. The predictors include several leading economic indicators of supply and demand shifts. The stock levels and quantities produced are found to have the highest predictive power. The preferred annual and monthly forecasting models outperform naive random walk forecasts by 27.1% and 3.4% respectively; their mean absolute percentage errors are 2.7% and 3.4% respectively. A simple trading strategy based on monthly forecasts is estimated to increase profits by 3.3% relative to a blind strategy that consists of always selling at the spot price.

Suggested Citation

  • Emmanuel Paroissien, 2019. "Forecasting bulk prices of Bordeaux wines using leading indicators," Post-Print hal-02408202, HAL.
  • Handle: RePEc:hal:journl:hal-02408202
    DOI: 10.1016/j.ijforecast.2019.04.021
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02408202
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