<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Fine wine has become an attractive alternative asset class in recent decades. In our study, we take the market microstructural perspective and verify how innovations in trading infrastructure affect the fine wine market. More specifically, we examine the average prices and the return volatility of fine wines traded on three different trading systems: automated electronic exchange, auctions and over-the-counter agreements (the OTC market). Our findings confirm an important role of a fully automated, cost-effective wine exchange in improving pricing efficiency and reducing market risk. This may constitute useful information for professional wine traders and institutional investors, who might consider shifting from less transparent trading systems into an automated on-book venue. This may also be a valuable indication for the future development of trading infrastructure in wine and other agricultural commodity markets.</p></abstract>

Fine wine has become an attractive alternative asset class in recent decades. In our study, we take the market microstructural perspective and verify how innovations in trading infrastructure affect the fine wine market. More specifically, we examine the average prices and the return volatility of fine wines traded on three different trading systems: automated electronic exchange, auctions and over-the-counter agreements (the OTC market). Our findings confirm an important role of a fully automated, cost-effective wine exchange in improving pricing efficiency and reducing market risk. This may constitute useful information for professional wine traders and institutional investors, who might consider shifting from less transparent trading systems into an automated on-book venue. This may also be a valuable indication for the future development of trading infrastructure in wine and other agricultural commodity markets.

The Effect of an Electronic Exchange on Prices and Return Volatility in the Fine Wine Market

Financial Internet Quarterly

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Fine wine has become an attractive alternative asset class in recent decades. In our study, we take the market microstructural perspective and verify how...

The Effect of an Electronic Exchange on Prices and Return Volatility in the Fine Wine Market

Published Online: Apr 15, 2019

Page range: 22 - 35

Received: Jun 14, 2018

Accepted: Dec 20, 2018

DOI: https://doi.org/10.2478/fiqf-2018-0025

Keywords
wine trading, wine prices, return volatility, electronic exchange, auctions

© 2018 Marcin Czupryna et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The Effect of an Electronic Exchange on Prices and Return Volatility in the Fine Wine Market

Published Online: Apr 15, 2019

Page range: 22 - 35

Received: Jun 14, 2018

Accepted: Dec 20, 2018

DOI: https://doi.org/10.2478/fiqf-2018-0025

Keywordswine trading, wine prices, return volatility, electronic exchange, auctions

© 2018 Marcin Czupryna et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
wine trading, wine prices, return volatility, electronic exchange, auctions