Economic policy uncertainty and fine wine prices

Abstract

Purpose

The paper aims to investigate the impact of economic policy uncertainty (EPU) (i.e. uncertainty due to government policies) on fine wine prices.

Design/methodology/approach

The paper uses the Baker et al. (2016) monthly news-based measure of EPU for the leading wine markets: the USA, the UK, France, Germany and China in conjunction with monthly fine wine pricing data from the London International Vintners Exchange (Liv-ex). The wine sub-indices used are the Liv-ex 500 (Bordeaux), Burgundy 150, Champagne 50, Rhone 100, Italy 100, California 50, Port 50 and Rest of the World 50. The Prais–Winsten and Cochrane–Orcutt regressions are used for our analyses to correct for effects of serial correlation. Time lags are chosen based on the appropriate information criterion.

Findings

Changes in EPU levels negatively impact changes in the Liv-ex 500 index for all our leading wine markets except France, the Champagne 50 index for the UK and the Burgundy 150 and the Rhone 100 indices for Germany, with the effects being significant for at least up to a quarter before EPU is detected. The authors did not find significant results for the EPU of France.

Practical implications

The paper aims to provide insights into whether EPU creates opportunities or threats for investors and wineries.

Originality/value

A forward-looking news-based EPU measure is used to gain insights into how the different Liv-ex sub-indices react to increases in uncertainty centered around government policies across a sample of different countries.

Citation

Shankar, N. and Francis, B. (2020), "Economic policy uncertainty and fine wine prices", International Journal of Wine Business Research, Vol. 32 No. 3, pp. 457-476. https://doi.org/10.1108/IJWBR-05-2019-0037