Art as an Investment and the Underperformance of Masterpieces

34 Pages Posted: 3 Nov 2008

See all articles by Jiangping Mei

Jiangping Mei

affiliation not provided to SSRN

Michael Moses

ART MARKET CONSULTANCY

Date Written: August 2001

Abstract

This paper constructs a new data set of repeated sales of artworks and estimates an annual index of art prices for the period 1875-2000. Contrary to earlier studies, we find art outperforms fixed income securities as an investment, though it significantly under-performs stocks in the US. Art is also found to have lower volatility and lower correlation with other assets, making it more attractive for portfolio diversification than discovered in earlier research. There is strong evidence of underperformance of masterpieces, meaning expensive paintings tend to under-perform the art market index. A further study reveals that the underperformance could be consistent with overbidding at auctions. The evidence is mixed on whether the "law of one price" holds in the New York auction market.

Suggested Citation

Mei, Jiangping and Moses, Michael, Art as an Investment and the Underperformance of Masterpieces (August 2001). NYU Working Paper No. FIN-01-012. Available at SSRN: https://ssrn.com/abstract=1294467

Jiangping Mei (Contact Author)

affiliation not provided to SSRN

No Address Available

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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