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Wine investing and trading IV: Market sentiment and activity

In the penultimate blogpost of this series on wine investing and trading, I shall discuss two metrics which we have developed here at WineQuant to characterise market sentiment.

The first metric is called the WQ Spread. It takes into account the monthly highs, lows and average trading values for a particular wine. It is designed to summarize the state of market sentiment. Market sentiment is healthy when the WQ Spread is stable over a sustained period of time. The way we see it, market stability means solid trading activity. On the other hand, volatility in the WQ Spread signifies negative sentiment. In this case, we would expect little or only sporadic activity. Let’s look at examples of these two scenarios, using Lynch-Bages 2010 and Haut-Brion 2010 as our pin-ups.

An example of the WQ spread over time is shown below. This is Lynch-Bages 2010 between October 2012 and January 2016.


Looking at the development of the WQ Spread over time, we see that market sentiment for Lynch-Bages 2010 has been positive and stable except for a blip in June 2015. The sudden movement was the result of an anomalous high trading price of £1600, compared to £1398 and £1380 in the months right before and after June 2015. The aberration did not disrupt the market: trading activity remained healthy in the following months. We will come back to this below.

The second metric we think is useful is called the WQ Normalised Spread-Stock Index. Let’s abbreviate that to WQ-NSSI. This is a composite index which characterises both supply and the market sentiment by taking into account the monthly available stock as well as the WQ spread.  The range of this normalised index is between 0 and 100.

In the figure below, I’ve plotted the WQ-NSSI together with trade volume as a percentage of available monthly stock for Lynch-Bages 2010. Trade volume as a percentage of monthly available stock is one possible measure of trading activity.


It is apparent from Figure 3 that there is no obvious correlation between the WQ Normalised Spread-Stock Index (WQ-NSSI) and the trading activity for Lynch-Bages 2010, a testament to the positive market sentiment for this wine. The anomalous trade which took place in June 2015 did not disrupt the market. In our previous report, we predicted that trading activity for Lynch-Bages to continue going strong through into Christmas 2015. The figure shows that this prediction has held true.

Seasonality is an important factor. Have a look at the seasonal trading peaks for this wine. In 2013 and 2014, the peak trading month was in May but the peak trading month was delayed until September in 2015. We can now attribute this to the summer market turmoil in the Chinese markets (see previous blogpost for a more elaborate discussion).

Finally, as a comparison, let’s look at the WQ Spread, WQ-NSSI and trading activity for Haut-Brion 2010.




The WQ-Spread for Haut-Brion 2010 is generally volatile over periods with low and/or sporadic trading activity. Spikes in the WQ-NSSI are a leading indicator for trading activity. We attribute this to intermittent liquidity (stock) injections in the market. Sudden bursts of supply effectively satiate immediate demand. Trading activity eventually picks up again, but there’s an inevitable time lag.

In the penultimate blogpost of this series, I have introduced two metrics developed by WineQuant to characterise the market sentiment: WQ Spread and WQ-NSSI. Used together, the metrics provide a sense of market direction, allowing us to read the tea-leaves and make predictions for trading activity in the months to come. It goes without saying that our best efforts are not immune to geopolitical or market shocks.

Talking about shocks, what would be the implications of Brexit on the UK wine trade? How might it affect wine-sourcing from the continent? We are not in a position to comment on this directly, but we are sure that our WineQuant metrics would reflect the effects of 1.) reduced access to the EU single market and 2.) an anticipated negative shock to the British Pound upon Brexit.

Other readable:

  • In praise of footpaths by Simon Wren-Lewis and how they are examples of a splendid combination of private and public rights.

RL @ WineQuant

Credits: Data from Liv-ex.

Creative Commons License
Wine investing and trading IV: Market sentiment and activity by WineQuant is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Based on work available at and

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