Behavioural heterogeneity in wine investments

Adrian Fernandez-Perez, Bart Frijns, Alireza Tourani-Rad and Jean-Philippe Weisskopf

Applied Economics, 2019, vol. 51, issue 30, 3236-3255

Abstract: 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.

Date: 2019
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DOI: 10.1080/00036846.2019.1566686

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