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An Examination of Tail Dependence in Bordeaux Futures Prices and Parker Ratings*

Published online by Cambridge University Press:  23 October 2017

Don Cyr ,
Lester Kwong  and
Ling Sun
Don Cyr*
Affiliation:
Goodman School of Business, Brock University, 1812 Sir Isaac Brock Way, St. Catharines, Ontario, L2S 3A1, Canada
Lester Kwong
Affiliation:
Department of Economics, Brock University, 1812 Sir Isaac Brock Way, St. Catharines, Ontario, L2S 3A1, Canada; e-mail: [email protected].
Ling Sun
Affiliation:
Department of Economics, Brock University, 1812 Sir Isaac Brock Way, St. Catharines, Ontario, L2S 3A1, Canada; e-mail: [email protected].
*
e-mail: [email protected] (corresponding author).
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Abstract

This paper explores the nonlinearities of the bivariate distribution of Bordeaux en primeur, or wine futures, prices and Parker “barrel ratings” for the period of 2004 through 2010. In particular, copula-function methodology is introduced and employed to examine the nature of the bivariate distribution. Our results show a significant nonlinear relationship between Parker ratings and wine prices, characterized by significant positive tail dependence and higher correlation between high ratings and high prices. Marginal distributions for Parker ratings and wine prices are then identified and Monte Carlo simulation is employed to operationalize the relationship for risk-management purposes. (JEL Classifications: C19, G13, L66)

Keywords

Bordeaux futurescopula functionswine ratings
Type
Articles
Information
Journal of Wine Economics , Volume 12 , Issue 3 , August 2017 , pp. 252 - 266
Copyright
Copyright © American Association of Wine Economists 2017 

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Footnotes

*

We thank the attendees at the 2016 American Association of Wine Economists Annual Meeting and an anonymous referee for their valuable comments.

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