In the final blogpost of this series, I will look to apply the tools developed over this series on one example: Carruades de Lafite 2010. This is a wine that is regularly traded on platforms due to its regular supply, healthy market sentiment and consistent expected margins. Here, we use trading data available from the Liv-Ex trading platform.
The above graph shows the WQ Inventory Value for Carruades de Lafite between June 2015 and February 2016. It is clear that the supply has been fairly regular. There was a build-up in inventory between June 2015 and August 2015 due to low trading activity which we shall see later.
The WQ Spread is a good indicator for both market sentiment and bid:offer ratios. A steady (and non-turbulent) trend in the spread as shown above shows that market sentiment for Carruades de Lafite has been very healthy over the last eight months. There is a small bump in December 2016 which is attributed to a possible trading hiccup as the market adjusts itself to slower trading activity in the months ahead. We (referring to WineQuant here) expect the spread to remain steady again in the months ahead, unless there is a major disruption in supply.
In the above two graphs, we have the WQ Normalised Spread-Stock Index (WQ-NSSI) and the trade volume as a percentage of available monthly stock. This index does not yield any useful information on trading activity for wines that are regularly traded (due to good supply and market sentiment). However, it is a far more useful indicator for less liquid wines such as Haut-Brion 2010.
The trade volume as a percentage of available monthly stock is a good indicator for trading activity in any particular month. Here, we note a seasonal trend in trading activity (similar to that found in Lynch-Bages 2010). Trading activity for Carruades de Lafite 2010 was fairly high in the months between August 2015 and December 2015. There has been a slow-down in trade after December 2015. We will thus expect the inventory to build up again over the coming months, as it did earlier in the months leading up to August 2015.
In this series, I have discussed and outlined the additional tools which were developed here at WineQuant to analyse the mechanics of the fine-wine market. We, at WineQuant, hope that you may find these tools useful if you are involved in wine-trading on both a regular and irregular basis. Do contact us if you have any further queries or you will like us to look at specific wines for you.
There are few upcoming projects which Martin and I are working on here at WineQuant. We look forward to your readership and following in the months ahead!
Wine investing and trading V: Carruades de Lafite 2010 by WineQuant is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.