Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-26T12:29:47.388Z Has data issue: false hasContentIssue false
  • English
  • Français

Reversals in Wine Auction Prices*

Published online by Cambridge University Press:  14 October 2013

Ginette McManus ,
Rajneesh Sharma  and
Ahmet Tezel
Ginette McManus
Affiliation:
Haub School of Finance, Saint Joseph's University, 5600 City Avenue, Philadelphia, PA 19131; e-mail: [email protected].
Rajneesh Sharma*
Affiliation:
Haub School of Finance, Saint Joseph's University, 5600 City Avenue, Philadelphia, PA 19131
Ahmet Tezel
Affiliation:
Haub School of Finance, Saint Joseph's University, 5600 City Avenue, Philadelphia, PA 19131; e-mail: [email protected].
*
(corresponding author). e-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper investigates reversals in wine auction prices following a series of strong positive and negative returns. Using the Chicago Wine Company's auction data, we find evidence of reversals after extreme wine price changes. There is a clear asymmetry in the market reaction to wine price increases and declines. Wine price declines after strong price increases are not, in general, as significant as wine price increases after strong price declines. The strongest reversal occurs for wines that have declined in price by more than 30 percent. (JEL Classifications: D44, G14)

Keywords

price reversalswine auctionswine prices
Type
Articles
Information
Journal of Wine Economics , Volume 8 , Issue 2 , November 2013 , pp. 189 - 197
Copyright
Copyright © American Association of Wine Economists 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

The authors thank Susan Koknar-Tezel as well as the participants at the 2010 Annual Conference of American Association of Wine Economists and the 2012 International Conference of the Academy of Business Administration in Munich who provided valuable comments and suggestions. The authors also thank the anonymous referee and the Editor of this Journal, Karl Storchmann, for a detailed review that shaped the final version of the paper. Of course, the authors accept responsibility for any remaining errors.

References

Ashenfelter, O. (1989). How auctions work for wine and art. Journal of Economic Perspectives, 3, 23–36.Google Scholar
Ashta, A. (2006). Win auctions: More explanations for the declining price anomaly. Journal of Wine Research, 17, 53–62.Google Scholar
Avramov, D., Chordia, T., and Goyal, A. (2006). Liquidity and autocorrelations in individual stock returns. Journal of Finance, 61, 2365–2394.Google Scholar
Ball, R., Kothari, S.P., and Weasley, C.E. (1995). Can we implement research on stock trading rules? Journal of Portfolio Management, 21(2), 54–63.Google Scholar
Black, J., and De Meza, D. (1992). Systematic price differences between successive auctions are no anomaly. Journal of Economic and Management Strategy, 1, 607–628.Google Scholar
Bremer, M., and Sweeney, R.J. (1991). The reversal of large stock-price decreases. Journal of Finance, 46, 747–754.Google Scholar
Conrad, J., Gautam, K., and Nimalendran, M. (1991). Components of short-horizon individual security returns. Journal of Financial Economics, 29, 365–384.Google Scholar
Conrad, J.S., Hameed, A., and Niden, C. (1994). Volume and autocovariances in short-horizon individual security returns. Journal of Finance, 49, 1305–1329.Google Scholar
Cooper, M. (1999). Filter rules based on price and volume in individual security overreaction. Review of Financial Studies, 12, 901–935.Google Scholar
Cox, D.R., and Peterson, D.R. (1994). Stock returns following large one-day declines: Evidence on short-term reversals and longer-term performance. Journal of Finance, 49, 255–267.Google Scholar
Di Vittorio, A., and Ginsburgh, V. (1996). Pricing red wines of Medoc vintages from 1949 to 1989 at Christie's auctions. Journal de la Société Statistique de Paris, 137, 19–49.Google Scholar
Ginsburgh, V. (1998). Absentee bidders and the declining price anomaly in wine auctions. Journal of Political Economy, 106, 1302–1319.Google Scholar
Gutierrez, R.C., and Kelley, E.K. (2008). The long-lasting momentum in weekly returns. Journal of Finance, 63, 415–447.Google Scholar
Jegadeesh, N. (1990). Evidence of predictable behavior of security returns. Journal of Finance, 45, 881–898.Google Scholar
Jegadeesh, N., and Titman, S. (1995). Short-horizon return reversals and the bid-ask spread. Journal of Financial Intermediation, 4, 116–132.Google Scholar
Kaul, G., and Nimalendran, M. (1990). Price reversals: Bid–ask errors or market overreaction? Journal of Financial Economics, 28, 67–93.Google Scholar
Lehman, B. (1990). Fads, martingales and market efficiency. Quarterly Journal of Economics, 105, 1–28.Google Scholar
Marks, D. (2009). Who pays brokers’ commissions? Evidence from fine wine auctions. Oxford Economic Papers, 61, 761–775.Google Scholar
McAfee, R., and Vincent, D. (1993). The declining price anomaly. Journal of Economic Theory, 60, 191–212.Google Scholar
McInish, T.H., Ding, D.K., Pyun, C.S., and Wongchoti, U. (2008). Short-horizon contrarian and momentum strategies in Asian markets: An integrated analysis. International Review of Financial Analysis, 17, 312–329.Google Scholar
Nam, K., Chong, S.P., and Avard, S.L. (2001). Asymmetric reverting behaviour of short-horizon stock returns: An evidence of stock market overreaction. Journal of Banking & Finance, 25, 807–824.Google Scholar
Platt, H.D. (2006). Revisiting the reversal of large stock-price declines. The Journal of Alternative Investments, 9, 48–63.Google Scholar
Subrahmanyam, A. (2005). Distinguishing between rationales for short-horizon predictability of stock returns. Financial Review, 40, 11–35.Google Scholar
Wang, C., and Yu, M. (2004). Trading activity and price reversals in futures markets. Journal of Banking and Finance, 28, 1337–1361.Google Scholar
Watkins, B.D. (2006). Institutional ownership and return reversals following short-term return consistency. Financial Review, 41, 435–448.Google Scholar
Yalçın, A. (2008). Gradual information diffusion and contrarian strategies. Quarterly Review of Economics & Finance, 48, 579–604.Google Scholar
Zawadowski, Á.G., Andor, G., and Kertész, J. (2006). Short-term market reaction after extreme price changes of liquid stocks. Quantitative Finance, 6, 283–295.Google Scholar