The prices for collectable whisky continue to rise. But for how many whiskies is this true? Is the market driven by just a few rare releases, or does every bottle of whisky gain value? The whisky market breadth will give us some answers.
The great thing about the Whiskystats project is that once we have all the price observations matched to the whiskies in our database, we can apply many well-known analytic techniques drawn from traditional financial markets. The methodology we examine today is the so-called market breadth. The market breadth is used to evaluate the movements of a market index by checking how many of the underlying assets followed the direction the index indicated.
Market Breadth
The breadth of the whisky market is simply the relative number of whiskies that gained any value. So, for example, if we want to calculate the market breadth of the August 2020 round of auctions, we count the number of whiskies for which the price in August was higher than the last known market price prior to August. If we divide this figure by the number of whiskies which experienced any price change in August, we get the market breadth. In August 2020, the whisky market breadth was 54%, meaning that 54% of the whiskies for which we had a price observation prior to August experienced a price increase.
Breadth over Time
We repeat the above calculation for all the rounds of auctions from early 2011 to August 2020. The below visualisation shows the respective monthly market breadth indicated by the grey line in the background. So the last value of the grey line is 54% from above. We also added the six-month moving average market breadth as the blue line to ease visual interpretation.
Overall, the six-month average market breadth tends to stay in the corridor of 50% to 60%. Above 50% means that there were more value gainers than value losers. Even monthly, the breadth tends to stay positive, i.e. above 50%. Only in the second half of 2019 do we observe many months of negative breadth. From July to December 2019, the Whiskystats Whisky Index (WWI) (our major market index) lost 8,5%.
The market breadth reached its peak in February 2015 when 67% of the then traded whiskies gained in value. At the same time the WWI, which describes the change in value of the 500 historically most traded whiskies each month, gained 3,7%. Besides the very early days in 2011, the market breadth saw its minimum in September 2019, when only 45% of the then traded whiskies gained value. In that round of auctions, the WWI lost 2% likewise.
Total Breadth
Instead of calculating the market breadth on a monthly basis, we can also look at (what we call) the total market breadth. This means that we compare the latest with the first price observation for every whisky in our database. The first price observation is the first recorded trade on auctions, not the original retail price. In addition, for obvious reasons, we are excluding those bottles which traded only once. By September 2020, this analysis comprises more than 45 thousand bottles of whisky.
In the below visualisation, you see the distribution of the overall change in value for all included bottles. The lower bound is naturally -100% since a bottle of whisky cannot lose more than that. We cut off the graph at an upper bound of 400%. Of course, some whiskies gained more value, but the majority (97% of all analysed bottles) lie within these boundaries.
Apparently, a lot of whiskies have a price change close to zero. This should be no big surprise since many new releases are entering the market, and it takes some time to move the price. Also, unsurprisingly we see that the higher the price change, the fewer whiskies that realise that increase. Not every bottle of whisky will double in price just like that.
So the whole area below this curve represents the total 100% of analysed whiskies. The area of positive value gains (above 0%) covers 69% of the total. Hence, the total market breadth is 69%, meaning that more than two-thirds of all whiskies in our database gained value on the auction market.
Besides the total market breadth, we can draw more information from this dataset. The average price increase was 70%, while the median was 25%. This means that half of the whiskies in our database gained more than 25% in value. The difference between the median and the mean indicates a few releases with an extraordinarily high price increase.
In a previous article, we examined the highest value gainers among the scotch whiskies. The overall highest gaining whiskies come from Japan, with the Hanyu Queen of Clubs toping this list. An initial auction price of 150 Euros and the latest observation coming in at 13.500 Euros equal an incredible 8.900% increase in value.
Disclaimer: the whisky market insights presented in this article are based on the Whiskystats database at the time of publication. Whiskystats is constantly adding new data, and therefore some charts and figures may not match after initial publication.