1. Macroeconomic Determinants of Wine Prices Linda Jiao
Juin 2016, Bordeaux

2. Fine wine price is sensitively related to economic dynamics
Macroeconomic determinants
Financial markets
Wine markets
Late - Wine assets are not having much liquidity
Immediate
Wealth effect
Cash effect
Volatility transmission

3. Objective: identify macroeconomic determinants of wine prices
Extend the study of Cevik and Sedik (2014)
With new variables on a longer monthly database from 1996 to 2015
GDP-G4 and GDP-BRIC - measure of demand
Global wine production and consumption
Broad money M3-G4 – wine assets are middle-long term engagement
Real effective exchange rate of Dollar – influence via demand
Real interest rate US – discount factor, speculation, alternative assets
Investment fund as percentage of GDP US – measure of financialization
Time dummy variables – capture additional information
Breakpoint 2004M01 – activation of financialization of fine wine market

4. Data – Liv-ex Fine Wine Investables Index
Macroeconomic data from OECD Statistics
Wine production and consumption data from OIV
most financialized Bordeaux fine wines

5. Model and analysis process
Variables are estimated in two econometric models to avoid the potential correlation problem among explanatory variables.
Real dollar term; logarithms; all variables are stationary.
Ordinary Least Squares Method and Generalized Method of Moments (Cevik and Sedik, 2014) - J-statistic: over-identifying restrictions are satisfied.
Newey-West estimator is used to address residual heteroscedaticity-autocorrelation issue.

7. Dummy variables confirm the negative effects in 2008, 2011, and China-led boom Absorbed the impact of consumption

10. Robustness check – Liv-ex Fine Wine 1000 Index
FW1000 Includes the fine wines from Bordeaux, Burgundy, Champagne, Rhone, Italy and Rest of the World.
Confirm previous results, except the influence from emerging markets is much less significant  Impact of emerging markets is limited for the wines from other regions outside of Bordeaux.
Bordeaux
Multi-region

11. Conclusion - key points
We empirically identified the macroeconomic determinants of fine wine prices on a monthly database from 1996 to 2015.
Demand from emerging markets played a key factor on fine wine pricing, more precisely, on the fluctuation of Bordeaux fine wine prices.
Continuous weakening of US Dollar in real term has favored the fine wine prices.
Since 2011, the slowdown of economic growth in emerging markets followed by the depreciation of national currencies has engendered negative impacts on fine wine markets.
With the process of financialization in fine wine market, factors such as money supply, real interest rate and the growth of investment fund started to show their influences on fine wine prices.
Back to the level before China-led boom is a new start.