Emerging Art Markets
Luxembourg School of Finance; Emory University - Goizueta Business School
VU University Amsterdam - Department of Finance
December 15, 2008
Emerging Markets Review, Vol. 11, No. 4, 2010
This paper analyzes the performance and risk-return characteristics of three major emerging art markets: Russia, China, and India. According to three national art market indices, built by hedonic regressions based on auction sales prices, the geometric annual returns are 10.00%, 5.70%, and 42.20% for Russia (1985-2008), China (1990-2008), and India (2002-2008), respectively. The Russian art market exhibits positive correlations with most common financial assets and a positive market beta, whereas the Chinese art market demonstrates a negative correlation overall and a negative market beta, and the Indian art index reveals a negative market beta and varying correlation results. Portfolio optimization under a power utility framework suggests limited diversification potential, but with a downside beta of 0.43, investing in Chinese art offers hedging potential during financial market downswings. Investigating the linkages between art and the economy through co-integration and causality analyses proves that emerging art markets share a significant long-term relation with other financial market instruments, but the short-term relations are largely absent.
Number of Pages in PDF File: 25
Keywords: Art market index, Art investments, Art finance, Alternative assets, Portfolio allocation
JEL Classification: G11, G14
Date posted: November 23, 2008 ; Last revised: April 7, 2011
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