Are Investors Credulous? Some Preliminary Evidence from Art Auctions

34 Pages Posted: 3 Nov 2008

See all articles by Jianping Mei

Jianping Mei

New York University (NYU) - Department of Finance

Michael Moses

ART MARKET CONSULTANCY

Date Written: October 2002

Abstract

This paper constructs a new data set from art auctions that include auctioneer presale price estimates to examine the credulity of art investors. While auction houses typically made no price estimates before 1973, they start providing high- and low- price estimates for all artworks thereafter. Thus, we have a natural experiment to observe changes in price behavior under the influence of auctioneer estimates. We find that the price estimates tend to have an upward bias for expensive paintings and high estimates at the time of purchase are associated with adverse future abnormal returns. These results are consistent with the view that investors are credulous. They do not discount fully the strategic incentives of auctioneers. However, we have some preliminary evidence that investors may have made some adjustment recently for the systematic bias in provided information.

Suggested Citation

Mei, Jianping and Moses, Michael, Are Investors Credulous? Some Preliminary Evidence from Art Auctions (October 2002). NYU Working Paper No. FIN-02-039. Available at SSRN: https://ssrn.com/abstract=1294411

Jianping Mei (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0354 (Phone)
212-995-4221 (Fax)

Michael Moses

ART MARKET CONSULTANCY ( email )

20 WEST 64TH STREET
APT 26K
NEW YORK, NY 10023
United States

HOME PAGE: http://www.stern.nyu.edu/om/faculty/moses/

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