Analytics for Wine Futures: Realistic Prices

• 成果类型: Article
• 署名作者: Hekimoglu, Mert Hakan; Kazaz, Burak
• 署名单位: Rensselaer Polytechnic Institute; Syracuse University
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.13193
• 发表日期: 2020
• 页码: 2096-2120
• 关键词: square-root lasso; bordeaux wine; expert opinion; QUALITY; weather; models; regression; selection; climate; MARKET

摘要

Earlier publications indicate that the price of young wines cannot be estimated accurately through weather conditions. Considering that a majority of fine wine is sold in the form of wine futures, even before the wine is bottled, determining realistic prices for these wine futures accurately is one of the most critical decisions. Surveys of leading wine merchants and industry experts exhibit significant departures from the realized market prices. We develop a pricing model for fine wines using weather, market, and expert reviews. The financial exchange for fine wines called Liv-ex has already adopted our estimated prices and tagged them as realistic prices. Our approach combines temperature, rainfall, market fluctuations, and tasting expert scores and leads to accurate estimations that the wine industry has not seen before. Our study shows that higher temperatures, lower levels of precipitation, appreciation in the Liv-ex 100 index as a market indicator, and higher barrel scores increase market prices. We conduct a comprehensive set of robustness checks and show that the mean absolute deviation of actual market prices from our estimated prices is substantially smaller than any academic benchmark. Our realistic prices help create transparency in this highly opaque market. When compared with the realized prices, our realistic prices guide buyers (e.g., distributors, restaurateurs, merchants) in their purchase decisions as they can determine whether a wine is underpriced or overpriced.