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An Econometric Model for Identifying Value in South African Red Wine

P. Van Rensburg (Professor of Finance, School of Management Studies, University of Cape Town, Private Bag, Rondebosch 7700, Republic of South Africa, Senior Portfolio Manager, Kagiso Asset Management, Cape Town)
D.A. Prülaid (Lecturer, School of Management Studies, University of Cape Town, Private Bag, Rondebosch 7700, Republic of South Africa)

International Journal of Wine Marketing

ISSN: 0954-7541

Article publication date: 1 January 2004

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Abstract

This article develops an econometric valuation methodology that is applied to identifying value in South African red wines. It is found that quality, as simultaneously measured by Wine magazine and Platter star ratings, is the dominant factor in explaining the cross‐section of prices. However, together with a varietal dummy these factors are only able to explain about 40% of the variation in wine prices. This implies that there is considerable value that may be gleaned through informed bargain seeking using this tool. Indeed, at certain levels of value there is more than a 50% differential in price.

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Citation

Van Rensburg, P. and Prülaid, D.A. (2004), "An Econometric Model for Identifying Value in South African Red Wine", International Journal of Wine Marketing, Vol. 16 No. 1, pp. 53-75. https://doi.org/10.1108/eb008766

Publisher

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Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited