Hostname: page-component-848d4c4894-v5vhk Total loading time: 0 Render date: 2024-07-02T07:31:29.415Z Has data issue: false hasContentIssue false
  • English
  • Français

On Pricing Unconventional Prepaid Forward Contracts: Evidence from en primeur Fine Wine

Published online by Cambridge University Press:  13 November 2019

Marcin Czupryna ,
Michał Jakubczyk  and
Paweł Oleksy
Marcin Czupryna
Affiliation:
Cracow University of Economics, Rakowicka 27, 31-510Cracow, Poland; e-mail: czuprynm@uek.krakow.pl.
Michał Jakubczyk
Affiliation:
SGH Warsaw School of Economics, Al. Niepodległości 162, 02-554Warsaw, Poland; e-mail: michal.jakubczyk@sgh.waw.pl.
Paweł Oleksy*
Affiliation:
Cracow University of Economics, Rakowicka 27, 31-510Cracow, Poland.
*
e-mail: oleksyp@uek.krakow.pl (corresponding author)
Get access Rights & Permissions [Opens in a new window]

Abstract

An en primeur agreement is an unconventional forward contract. In this article, we provide a new conceptual framework for analyzing the properties of en primeur prices based on the cost of carry approach. The results, based upon Bayesian modeling, indicate that the cost of carry increases up to 0.9598 when en primeur and bottled wines are traded in parallel. Moreover, our findings confirm that price dispersion around the mean value is greater for en primeur wines (22.42%) than for standard bottled wines (8.2%) traded after the sale of en primeur wines has ended. (JEL Classifications: G12, G15, L66, Q02)

Keywords

Bayesian methodsen primeurfine wine tradingLiv-exprepaid forwards
Type
Articles
Information
Journal of Wine Economics , Volume 14 , Issue 4 , November 2019 , pp. 400 - 408
Copyright
Copyright © American Association of Wine Economists 2019

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We are grateful to Liv-ex Ltd. for providing access to the data. We also thank the attendees of the 2018 Derivative Markets Conference held in Auckland and the 2019 American Association of Wine Economics Annual Meeting held in Vienna, Karl Storchmann, and an anonymous referee for their valuable comments. All remaining errors are the responsibility of the authors. This research was supported by the National Science Centre of Poland (grant no. 2015/17/B/HS4/02708) and by the Ministry of Science and Higher Education within “Regional Initiative of Excellence” Programme for 2019–2022 (grant no. 021/RID/2018/19).

References

Ali, H. H., Lecocq, S., and Visser, M. (2010). The impact of gurus: Parker grades and en primeur wine prices. Journal of Wine Economics, 5(1), 22–39.CrossRefGoogle Scholar
Ali, H. H., and Nauges, C. (2007). The pricing of experience goods: The example of en primeur wine. American Journal of Agricultural Economics, 89(1), 91–103.CrossRefGoogle Scholar
Ashenfelter, O. (2008). Predicting the prices and quality of Bordeaux wines. Economic Journal, 118(529), F174–F184.CrossRefGoogle Scholar
Ashton, R. H. (2016). The value of expert opinion in the pricing of Bordeaux wine futures. Journal of Wine Economics, 11(2), 261–88.CrossRefGoogle Scholar
Baciocco, K. A., Davis, R. E., and Jones, G. V. (2014). Climate and Bordeaux wine quality: Identifying the key factors that differentiate vintages based on consensus rankings. Journal of Wine Research, 25(2), 75–90.CrossRefGoogle Scholar
Bouri, E. I. (2015). Fine wine as an alternative investment during equity market downturns. Journal of Alternative Investments, 17(4), 46–57.CrossRefGoogle Scholar
Bouri, E., Gupta, R., Wong, W. K., and Zhu, Z. (2018). Is wine a good choice for investment? Pacific-Basin Finance Journal, 51, 171–183.CrossRefGoogle Scholar
Bouri, E., and Roubaud, D. (2016). Fine wines and stocks from the perspective of UK investors: Hedge or safe haven? Journal of Wine Economics, 11(2), 233–248.CrossRefGoogle Scholar
Breeden, J., and Liang, S. (2017). Auction-price dynamics for fine wines from age-period-cohort models. Journal of Wine Economics, 12(2), 173–202.CrossRefGoogle Scholar
Cardebat, J., Faye, B., Le Fur, E., and Storchmann, K. (2017). The law of one price? Price dispersion on the auction market for fine wine. Journal of Wine Economics, 12(3), 302–331.CrossRefGoogle Scholar
Cyr, D., Kwong, L., and Sun, L. (2017). An examination of tail dependence in Bordeaux futures prices and Parker ratings. Journal of Wine Economics, 12(3), 252–266.CrossRefGoogle Scholar
Cyr, D., Kwong, L., and Sun, L. (2019). Who will replace Parker? A copula function analysis of Bordeaux en primeur wine raters. Journal of Wine Economics. doi:10.1017/jwe.2019.4CrossRefGoogle Scholar
Czupryna, M., and Oleksy, P. (2018). The effect of an electronic exchange on prices and return volatility in the fine wine market. e-Finanse, 14(4), 22–35.CrossRefGoogle Scholar
Dimson, E., Rousseau, P. L., and Spaenjers, C. (2015). The price of wine. Journal of Financial Economics, 118(2), 431–449.CrossRefGoogle Scholar
Dubois, P., and Nauges, C. (2010). Identifying the effect of unobserved quality and expert reviews in the pricing of experience goods: Empirical application on Bordeaux wine. International Journal of Industrial Organization, 28(3), 205–212.CrossRefGoogle Scholar
Erdős, P., and Ormos, M. (2013). Components of investment grade wine prices. Journal of Wine Research, 24(3), 227–247.CrossRefGoogle Scholar
Faye, B., and Le Fur, E. (2019). On the constancy of hedonic wine price coefficients over time. Journal of Wine Economics, 14(2), 182–207.CrossRefGoogle Scholar
Faye, B., Le Fur, E., and Prat, S. (2015). Dynamics of fine wine and asset prices: Evidence from short- and long-run co-movements. Applied Economics, 47(29), 3059–3077.Google Scholar
Jones, G. V., and Storchmann, K. (2001). Wine market prices and investment under uncertainty: An econometric model for Bordeaux crus classes. Agricultural Economics, 26(2), 115–133.Google Scholar
Kruschke, J. (2014). Doing Bayesian Data Analysis: A Tutorial with R, JAGS, and Stan. London, UK, San Diego, CA, and Waltham, MA: Academic Press, 2014.Google Scholar
Le Fur, E., Ameur, H. B., and Faye, B. (2016). Time-varying risk premiums in the framework of wine investment. Journal of Wine Economics, 11(3), 355–378.CrossRefGoogle Scholar
Masset, P., Cardebat, J. M., Faye, B., and Le Fur, E. (2017). Analyzing the risk of an illiquid asset. In Proceedings of the Financial Management Association (FMA) European Conference 2017 (No. CONFERENCE). 22–23 June 2017. Working paper presented at the 2017 FMA European Conference.Google Scholar
Masset, P., and Henderson, C. (2010). Wine as an alternative asset class. Journal of Wine Economics, 5(1), 87–118.CrossRefGoogle Scholar
Masset, P., Weisskopf, J.-P., and Cossutta, M. (2015). Wine tasters, ratings, and en primeur prices. Journal of Wine Economics, 10(1), 75–107.CrossRefGoogle Scholar
McDonald, R. L. (2013). Market Derivatives, 3rd ed.London, UK: Pearson Education Inc.Google Scholar
Noparumpa, T., Kazaz, B., and Webster, S. (2015). Wine futures and advanced selling under quality uncertainty. Manufacturing and Service Operations Management, 17(3), 1–16.CrossRefGoogle Scholar
Sanning, L. W., Shaffer, S., and Sharratt, J. M. (2008). Bordeaux wine as a financial investment. Journal of Wine Economics, 3(1), 51–71.CrossRefGoogle Scholar