Buying Beauty: On Prices and Returns in the Art Market
Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)
HEC Paris - Finance Department
April 22, 2012
Management Science, Vol. 59, No. 1, 2013
This paper investigates the price determinants and investment performance of art. We apply a hedonic regression analysis to a new data set of over one million auction transactions of paintings and works on paper. Based on the resulting price index, we conclude that art has appreciated in value by a moderate 3.97% per year, in real U.S. dollar terms, between 1957 and 2007. This is a performance similar to that of corporate bonds – at much higher risk. A repeat-sales regression on a subset of the data demonstrates the robustness of our index. Next, quantile regressions document larger average price appreciations (and higher volatilities) in more expensive price brackets. We also find variation in historical returns across mediums and movements. Finally, we show that measures of high-income consumer confidence and art market sentiment predict art price trends.
Number of Pages in PDF File: 33
Keywords: art, auctions, hedonic regressions, investments, repeat-sales regressions, sentiment
JEL Classification: Z11, G11, E21
Date posted: March 3, 2009 ; Last revised: March 13, 2013
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