Buying Beauty: On Prices and Returns in the Art Market

Management Science, Vol. 59, No. 1, 2013

33 Pages Posted: 3 Mar 2009 Last revised: 13 Mar 2013

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Christophe Spaenjers

HEC Paris - Finance Department

Date Written: April 22, 2012

Abstract

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.

Keywords: art, auctions, hedonic regressions, investments, repeat-sales regressions, sentiment

JEL Classification: Z11, G11, E21

Suggested Citation

Renneboog, Luc and Spaenjers, Christophe, Buying Beauty: On Prices and Returns in the Art Market (April 22, 2012). Management Science, Vol. 59, No. 1, 2013. Available at SSRN: https://ssrn.com/abstract=1352363 or http://dx.doi.org/10.2139/ssrn.1352363

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Christophe Spaenjers

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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