Collectibles

Research – Analysis of the factors determining fine wine price fluctuations
Although fine wine is known to be an interesting asset class, previous research has also shown that the broad market seems to be heavily affected by macroeconomic factors, resulting in strong swings of most wine indexes.

Earlier this year, IMF economists Serhan Cevik and Tahsin Saadi Sedik published a working paper designed to investigate the causes for the extreme fluctuations in commodity prices from 1990 to 2010.

The results can be summarized as:
• Impact of demand vs. supply on prices: Two-third of the price fluctuation in both commodities between 1998 and 2010 can be explained by changes in demand.

• Aggregate demand in advanced vs. emerging market economies: The results show that the impact of industrial output on fine wine prices is not only highly significant, but also five times higher in emerging economies than in advanced economies.

• Impact of global liquidity: The authors point out that this increase of excess liquidity in combination with low real interest rates likely magnified the price pressure stemming from supply / demand imbalances.

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