Behavioural heterogeneity in wine investments |
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Authors: | Adrian Fernandez-Perez Bart Frijns Alireza Tourani-Rad Jean-Philippe Weisskopf |
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Affiliation: | 1. Auckland University of Technology, Auckland, New Zealandadrian.fernandez@aut.ac.nz;3. Auckland University of Technology, Auckland, New Zealand;4. Ecole h?telière de Lausanne, HES-SO//University of Applied Sciences Western Switzerland, Lausanne, Switzerland |
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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. |
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Keywords: | Wine investments Heterogeneous agent models behavioural finance |
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