To share or not to share: An analysis of wine list disclosure by Swiss restaurant owners (download)
with Olivier Gergaud, Philippe Masset and Alice Pedrinelli, Journal of Wine Economics, 2024, 19(1): 4-18.
This paper uses data from the 2021 Swiss edition of the Gault&Millau food guide to analyze the probability with which restaurant owners decide to share their wine list with the public. This is an important question relating to the amount of information circulating in markets characterized by information asymmetry in the context of experience and credence goods. We find that restaurant owners are more willing to share wine lists with others if competition is limited or their wine list does not contain idiosyncratic information that competitors may use strategically. Interviews indicate the challenge for restaurants to balance the risk of sharing information with competitors and the opportunity to attract wine lovers by revealing an appealing wine list. We also show that this decision depends on cultural considerations.
Efficient Pricing of Bordeaux en primeur wines (download)
with Jean-Marie Cardebat and Philippe Masset, Journal of Wine Economics, 2023, 18(1): 39-65.
This paper proposes an approach to determine efficient release prices on the Bordeaux en primeur (primary) market. The model exploits information from the secondary market to estimate efficient release prices. We apply the model to a representative sample of wines from the 2021 vintage. The results show that most chateaux released their wines at prices that were too high. The median overpricing is 5.2% but exceeds 30% for some wines. This situation may be partially attributed to excessively uniform pricing caused by the tendency of chateaux with similar status to release their wines at similar price levels.
Fine wine pricing in a small and highly competitive market (download)
with Philippe Masset and Alexandre Mondoux, International Journal of Wine Business Research, 2023, 35(1): 164-186.
This study aims to identify the price determinants of fine wines in a small and competitive market, which are characteristics found in many lesser-known wine-producing countries and are often difficult to analyse due to a lack of data. Using hand-collected data from Swiss wineries over the period 2014-2018, we estimate the wine and market characteristics driving fine wine prices. We complement this analysis by studying the impact a sudden currency shock and a reduction in information asymmetries had on prices. Prices mainly depend on collective reputation, production techniques, and product positioning. Surprisingly, following a sharp appreciation of the Swiss Franc, producers did not reduce prices. Finally, the arrival of a highly influential wine expert on the market also had a positive price effect on rated wines and producers. Both hint at an attempt of wineries to reposition themselves relatively to international competition. Few studies examine the price drivers in lesser-known wine markets, where competition is fierce. Our results show that wine pricing differs from other more famous and larger wine regions. We also are the first to analyse the impact of a currency shock and a reduction in information asymmetries on wine prices.
At what price should Bordeaux wines be released? (download)
with Philippe Masset, Economic Inquiry, 2022, 60(1): 392-412.
This paper models optimal release prices of an experience good recurrently issued on markets. Using a sample of Bordeaux wines, we find that using a minimal number of intrinsic and extrinsic attributes is sufficient to explain a large proportion of release prices. We further observe a significant relationship between primary market prices and secondary market prices and general economic conditions. Release prices can deviate from secondary market prices in the short run but remain aligned over the long run. Finally, an out-of-sample analysis indicates that short-run mispricing directly affects the purchase behavior of customers.
Analysing the risks of an illiquid and global asset: The case of fine wines (download)
with Philippe Masset, Jean-Marie Cardebat, Benoit Faye, and Eric Le Fur, (Lead Article) Quarterly Review of Economics and Finance, 2021, 82: 1-25.
We use a unique and very deep database to examine the performance of wine investments over the period 2003–2014. Our results reveal that the returns stemming from those investments are important but can largely be explained by their exposure to common risk factors. As such and contradicting prior evidence, fine wines do not seem to offer abnormal returns. While explicitly accounting for non-synchronous trading, we how that the market beta of wine is always positive and significant. Liquidity risk is also an essential determinant of wine returns. The fact that the liquidity factor, based on stock returns, can explain the returns on an exotic asset such as wine suggests that illiquidity is a common, cross-asset source of risk. This paper contributes to the literature on alternative investments and wine as an asset class and provides additional evidence regarding the nature of liquidity risk.
New York restaurants: a wine odyssey between 1865 and 1920 (download)
with Philippe Masset, Cornell Hospitality Quarterly, 2021, 62(3): 297-312.
We examine the existence of wine in New York City restaurant menus over the period 1865 to 1920 for a sample of 850,000 restaurant menu items and 51,000 wines. Wine was already commonly present on menus in 1865, and its offering increased up until 1914 before dropping with the outbreak of First World War (WWI). Casual restaurants offered a narrower wine selection. Special menus displayed a significantly higher probability of containing wine but with a more limited choice indicating that wine was especially appreciated on special occasions. French wines, especially from Bordeaux and Champagne, were the most represented on menus followed by wines from Germany. The average selling price of a bottle of wine was around US$40 in 2018 terms. Prices, however, fluctuated widely over time and wine type. Notably, American wines were about 50% less expensive than French or German wines.
Last Frontier Investments: The Case of Alpine Wines (download)
with Philippe Masset and Clémentine Fauchery, Journal of Wine Economics, 2020, 15(2): 181-206.
We identify and examine the performance of frontier investments from 2002 to 2017. Using fine wine as a setting, we find that the trade frequency and value of frontier investments in the form of Alpine wines have increased in recent years, leading to a rise in their prices above inflation rates. We further document that this frontier investment has been favorable in terms of risk-adjusted returns and volatility for investors. We also observe that the inclusion of frontier wines in a financial portfolio is favorable for investors, both in terms of returns and diversification benefits, due to low correlation coefficients. The identification and investment into frontier assets appears beneficial for investors looking for new opportunities.
Behavioural heterogeneity in wine investments (download)
with Adrian Fernandez-Perez, Bart Frijns, and Alireza Tourani-Rad, Applied Economics, 2019, 51(30): 3236-3255.
We introduce a heterogeneous agent model to explain the dynamics of fine wine investments. Our results show evidence of the existence of both fundamentalists – those who trade on mean-reversion towards a fair value – and chartists – those who extrapolate recently observed price trends – in the wine market. Moreover, we document that market participants switch between the two trading strategies, allocating more weight to the strategy that has been the most accurate in forecasting wine index values in the recent past. This switching behaviour can explain the large variations in index values (bubbles and crashes) that are observed in the fine wine market.
Producing and consuming locally: Switzerland as a local market (link)
with Philippe Masset, 2019, In: A. Alonso Ugaglia et al. (Eds.) The Palgrave Handbook of Wine Industry Economics. Basingstoke, England: Palgrave Macmillan.
Wine indices in practice: nicely labeled but slightly corked (download)
with Philippe Masset, Economic Modelling, 2018, 68: 555-569.
This paper examines and compares wine price indices available on the wine market with those proposed in academia. We especially analyze the impact illiquidity has on the different indices and validate our findings using a simulation which allows us to define the biases induced by illiquidity on the statistical properties of the indices. We also propose adjustments to help market participants improve the reliability of wine indices and ultimately their decision-making. Our evidence indicates that both the volatility and the beta of fine wine is understated when estimated with existing wine index data. The true volatility and beta of the First Growths from Bordeaux appear to be close to 20%, respectively 0.45–0.60, suggesting that the diversification potential of fine wine is more limited than commonly believed.
Raise your glass: Wine investment and the financial crisis (link)
with Philippe Masset, 2018, In: O. Ashenfelter et al. (Eds.) Handbook of the Economics of Wine. Singapore: World Scientific Publishing.
Red obsession: the ascent of red wine in China (download)
with Philippe Masset, Benoit Faye, and Eric Le Fur, Emerging Markets Review, 2016, 29: 200-225.
This article uses hammer prices from five global auction houses to analyse the price premium Bordeaux fine wine yielded at Hong Kong wine auctions. We find that fine wine was on average sold at a 19% premium in Hong Kong. We further observe that the Hong Kong premium is not uniform and most pronounced for wines with perfect Parker scores and the most powerful brands. The premium has declined throughout the sample period from 60% in 2008 to a level of 15% since 2012. This can be attributed to the increase in knowledge on fine wine by Chinese customers.
A study of the performance of fine wine on the Swiss market (download)
with Philippe Masset, International Journal of Entrepreneurship and Small Business,2016, 26(4): 566-582.
This paper studies the price evolution and the performance of an investment in fine wine on the Swiss market over the period 2002-2012. Using a repeat-sales-regression approach we calculate different wine indices based on auction hammer prices obtained by Steinfels Weinauktionen. Our results show that different fine wines followed a similar evolution across the sample period but that the amplitude of returns strongly depended on wine regions and types. While Bordeaux and Burgundy wines performed well, wines from the Rhône valley and Italy show a poorer performance. Compared to financial assets wine has significantly outperformed stocks, but not bonds. We further find that the Swiss franc appreciation has had a significant impact on wine prices.
Wine funds - an alternative turning sour? (download)
with Philippe Masset, (Lead Article) Journal of Alternative Investments, 2015, 17(4): 6-20.
This article examines the performance, selectivity, and market-timing abilities of wine fund managers over the 2000–2013 period. The authors hypothesize that wine fund managers should be able to profit from market inefficiencies on the wine market and generate abnormal returns for investors. Their results show that fund managers’ overall selectivity and market-timing abilities appear to be limited. Only one fund offers positive risk-adjusted returns and two funds show a tendency for market timing. Considering non-quantifiable risks, wine funds thus do not appear to be interesting investments.
Wine tasters, ratings and en primeur prices (download)
with Philippe Masset and Mathieu Cossutta, Journal of Wine Economics, 2015, 10(1): 75-107.
This paper examines the ratings of 12 influential wine critics on the Bordeaux en primeur market over the vintages 2003–2012. We hypothesize that wine experts differ significantly in their rating approach and influence on prices. We find that European critics are less transparent and in general more severe in their scoring than their American counterparts. Experts also appear to reach a relatively strong consensus on overall wine quality but have more diverse opinions on wines that achieve a surprising level of quality given the vintage, the ranking, or the appellation from which they originate. Our evidence also suggests that Robert Parker and Jean-Marc Quarin are the most influential critics, as a 10% surprise in their scores leads to a price increase of around 7%. We further find that their impact is higher for appellations and estates that are not covered by the official 1855 classification and for the best vintages.
Wine as an alternative asset class (link)
with Philippe Masset, 2013, In: M.-C. Pichery & E. Giraud-Héraud (Eds.) Wine Economics: Quantitative Studies and Empirical Applications. Basingstoke, England: Palgrave Macmillan.
with Olivier Gergaud, Philippe Masset and Alice Pedrinelli, Journal of Wine Economics, 2024, 19(1): 4-18.
This paper uses data from the 2021 Swiss edition of the Gault&Millau food guide to analyze the probability with which restaurant owners decide to share their wine list with the public. This is an important question relating to the amount of information circulating in markets characterized by information asymmetry in the context of experience and credence goods. We find that restaurant owners are more willing to share wine lists with others if competition is limited or their wine list does not contain idiosyncratic information that competitors may use strategically. Interviews indicate the challenge for restaurants to balance the risk of sharing information with competitors and the opportunity to attract wine lovers by revealing an appealing wine list. We also show that this decision depends on cultural considerations.
Efficient Pricing of Bordeaux en primeur wines (download)
with Jean-Marie Cardebat and Philippe Masset, Journal of Wine Economics, 2023, 18(1): 39-65.
This paper proposes an approach to determine efficient release prices on the Bordeaux en primeur (primary) market. The model exploits information from the secondary market to estimate efficient release prices. We apply the model to a representative sample of wines from the 2021 vintage. The results show that most chateaux released their wines at prices that were too high. The median overpricing is 5.2% but exceeds 30% for some wines. This situation may be partially attributed to excessively uniform pricing caused by the tendency of chateaux with similar status to release their wines at similar price levels.
Fine wine pricing in a small and highly competitive market (download)
with Philippe Masset and Alexandre Mondoux, International Journal of Wine Business Research, 2023, 35(1): 164-186.
This study aims to identify the price determinants of fine wines in a small and competitive market, which are characteristics found in many lesser-known wine-producing countries and are often difficult to analyse due to a lack of data. Using hand-collected data from Swiss wineries over the period 2014-2018, we estimate the wine and market characteristics driving fine wine prices. We complement this analysis by studying the impact a sudden currency shock and a reduction in information asymmetries had on prices. Prices mainly depend on collective reputation, production techniques, and product positioning. Surprisingly, following a sharp appreciation of the Swiss Franc, producers did not reduce prices. Finally, the arrival of a highly influential wine expert on the market also had a positive price effect on rated wines and producers. Both hint at an attempt of wineries to reposition themselves relatively to international competition. Few studies examine the price drivers in lesser-known wine markets, where competition is fierce. Our results show that wine pricing differs from other more famous and larger wine regions. We also are the first to analyse the impact of a currency shock and a reduction in information asymmetries on wine prices.
At what price should Bordeaux wines be released? (download)
with Philippe Masset, Economic Inquiry, 2022, 60(1): 392-412.
This paper models optimal release prices of an experience good recurrently issued on markets. Using a sample of Bordeaux wines, we find that using a minimal number of intrinsic and extrinsic attributes is sufficient to explain a large proportion of release prices. We further observe a significant relationship between primary market prices and secondary market prices and general economic conditions. Release prices can deviate from secondary market prices in the short run but remain aligned over the long run. Finally, an out-of-sample analysis indicates that short-run mispricing directly affects the purchase behavior of customers.
Analysing the risks of an illiquid and global asset: The case of fine wines (download)
with Philippe Masset, Jean-Marie Cardebat, Benoit Faye, and Eric Le Fur, (Lead Article) Quarterly Review of Economics and Finance, 2021, 82: 1-25.
We use a unique and very deep database to examine the performance of wine investments over the period 2003–2014. Our results reveal that the returns stemming from those investments are important but can largely be explained by their exposure to common risk factors. As such and contradicting prior evidence, fine wines do not seem to offer abnormal returns. While explicitly accounting for non-synchronous trading, we how that the market beta of wine is always positive and significant. Liquidity risk is also an essential determinant of wine returns. The fact that the liquidity factor, based on stock returns, can explain the returns on an exotic asset such as wine suggests that illiquidity is a common, cross-asset source of risk. This paper contributes to the literature on alternative investments and wine as an asset class and provides additional evidence regarding the nature of liquidity risk.
New York restaurants: a wine odyssey between 1865 and 1920 (download)
with Philippe Masset, Cornell Hospitality Quarterly, 2021, 62(3): 297-312.
We examine the existence of wine in New York City restaurant menus over the period 1865 to 1920 for a sample of 850,000 restaurant menu items and 51,000 wines. Wine was already commonly present on menus in 1865, and its offering increased up until 1914 before dropping with the outbreak of First World War (WWI). Casual restaurants offered a narrower wine selection. Special menus displayed a significantly higher probability of containing wine but with a more limited choice indicating that wine was especially appreciated on special occasions. French wines, especially from Bordeaux and Champagne, were the most represented on menus followed by wines from Germany. The average selling price of a bottle of wine was around US$40 in 2018 terms. Prices, however, fluctuated widely over time and wine type. Notably, American wines were about 50% less expensive than French or German wines.
Last Frontier Investments: The Case of Alpine Wines (download)
with Philippe Masset and Clémentine Fauchery, Journal of Wine Economics, 2020, 15(2): 181-206.
We identify and examine the performance of frontier investments from 2002 to 2017. Using fine wine as a setting, we find that the trade frequency and value of frontier investments in the form of Alpine wines have increased in recent years, leading to a rise in their prices above inflation rates. We further document that this frontier investment has been favorable in terms of risk-adjusted returns and volatility for investors. We also observe that the inclusion of frontier wines in a financial portfolio is favorable for investors, both in terms of returns and diversification benefits, due to low correlation coefficients. The identification and investment into frontier assets appears beneficial for investors looking for new opportunities.
Behavioural heterogeneity in wine investments (download)
with Adrian Fernandez-Perez, Bart Frijns, and Alireza Tourani-Rad, Applied Economics, 2019, 51(30): 3236-3255.
We introduce a heterogeneous agent model to explain the dynamics of fine wine investments. Our results show evidence of the existence of both fundamentalists – those who trade on mean-reversion towards a fair value – and chartists – those who extrapolate recently observed price trends – in the wine market. Moreover, we document that market participants switch between the two trading strategies, allocating more weight to the strategy that has been the most accurate in forecasting wine index values in the recent past. This switching behaviour can explain the large variations in index values (bubbles and crashes) that are observed in the fine wine market.
Producing and consuming locally: Switzerland as a local market (link)
with Philippe Masset, 2019, In: A. Alonso Ugaglia et al. (Eds.) The Palgrave Handbook of Wine Industry Economics. Basingstoke, England: Palgrave Macmillan.
Wine indices in practice: nicely labeled but slightly corked (download)
with Philippe Masset, Economic Modelling, 2018, 68: 555-569.
This paper examines and compares wine price indices available on the wine market with those proposed in academia. We especially analyze the impact illiquidity has on the different indices and validate our findings using a simulation which allows us to define the biases induced by illiquidity on the statistical properties of the indices. We also propose adjustments to help market participants improve the reliability of wine indices and ultimately their decision-making. Our evidence indicates that both the volatility and the beta of fine wine is understated when estimated with existing wine index data. The true volatility and beta of the First Growths from Bordeaux appear to be close to 20%, respectively 0.45–0.60, suggesting that the diversification potential of fine wine is more limited than commonly believed.
Raise your glass: Wine investment and the financial crisis (link)
with Philippe Masset, 2018, In: O. Ashenfelter et al. (Eds.) Handbook of the Economics of Wine. Singapore: World Scientific Publishing.
Red obsession: the ascent of red wine in China (download)
with Philippe Masset, Benoit Faye, and Eric Le Fur, Emerging Markets Review, 2016, 29: 200-225.
This article uses hammer prices from five global auction houses to analyse the price premium Bordeaux fine wine yielded at Hong Kong wine auctions. We find that fine wine was on average sold at a 19% premium in Hong Kong. We further observe that the Hong Kong premium is not uniform and most pronounced for wines with perfect Parker scores and the most powerful brands. The premium has declined throughout the sample period from 60% in 2008 to a level of 15% since 2012. This can be attributed to the increase in knowledge on fine wine by Chinese customers.
A study of the performance of fine wine on the Swiss market (download)
with Philippe Masset, International Journal of Entrepreneurship and Small Business,2016, 26(4): 566-582.
This paper studies the price evolution and the performance of an investment in fine wine on the Swiss market over the period 2002-2012. Using a repeat-sales-regression approach we calculate different wine indices based on auction hammer prices obtained by Steinfels Weinauktionen. Our results show that different fine wines followed a similar evolution across the sample period but that the amplitude of returns strongly depended on wine regions and types. While Bordeaux and Burgundy wines performed well, wines from the Rhône valley and Italy show a poorer performance. Compared to financial assets wine has significantly outperformed stocks, but not bonds. We further find that the Swiss franc appreciation has had a significant impact on wine prices.
Wine funds - an alternative turning sour? (download)
with Philippe Masset, (Lead Article) Journal of Alternative Investments, 2015, 17(4): 6-20.
This article examines the performance, selectivity, and market-timing abilities of wine fund managers over the 2000–2013 period. The authors hypothesize that wine fund managers should be able to profit from market inefficiencies on the wine market and generate abnormal returns for investors. Their results show that fund managers’ overall selectivity and market-timing abilities appear to be limited. Only one fund offers positive risk-adjusted returns and two funds show a tendency for market timing. Considering non-quantifiable risks, wine funds thus do not appear to be interesting investments.
Wine tasters, ratings and en primeur prices (download)
with Philippe Masset and Mathieu Cossutta, Journal of Wine Economics, 2015, 10(1): 75-107.
This paper examines the ratings of 12 influential wine critics on the Bordeaux en primeur market over the vintages 2003–2012. We hypothesize that wine experts differ significantly in their rating approach and influence on prices. We find that European critics are less transparent and in general more severe in their scoring than their American counterparts. Experts also appear to reach a relatively strong consensus on overall wine quality but have more diverse opinions on wines that achieve a surprising level of quality given the vintage, the ranking, or the appellation from which they originate. Our evidence also suggests that Robert Parker and Jean-Marc Quarin are the most influential critics, as a 10% surprise in their scores leads to a price increase of around 7%. We further find that their impact is higher for appellations and estates that are not covered by the official 1855 classification and for the best vintages.
Wine as an alternative asset class (link)
with Philippe Masset, 2013, In: M.-C. Pichery & E. Giraud-Héraud (Eds.) Wine Economics: Quantitative Studies and Empirical Applications. Basingstoke, England: Palgrave Macmillan.
