Climate Extrapolation and Relative Asset Pricing: Evidence from Bordeaux Premier Cru Wine Auctions

Abstract

We identify “climate extrapolation” by exploiting a unique feature of the fine wine market: global comparability with locally-determined prices. Using a new dataset of Bordeaux Premier Cru auctions, we find that a one-standard-deviation increase is associated with a 3.58% price drop for identical bottles sold in the same month. This finding is consistent with the availability heuristic, as it is stronger in periods when climate change news is more palpable. The price discount reflects concerns from both investors, demanding climate risk premia for lower-quality wines, and consumers, showing aversion to wines near the end of their optimal consumption window.

Keywords: auctions, risk premia, wine, climate change, extrapolation, salience, alternative investment, extrapolation