Random Walk Theory and the Weak-Form Efficiency of the US Art Auction Prices
41 Pages Posted: 26 Feb 2020
Date Written: March 8, 2010
We perform variance ratio tests based on non-parametric methods to detect the size of the random walk component of the US art auction prices. The past 134 years of the US art prices exhibit large transitory component (72%) and based on this, the random walk hypothesis does not hold. However, possibly due to sparse data before 1935 or due to institutional changes of the art market after World War II, we detect structural breakpoints and find that the random walk hypothesis and the weak-form efficiency of the US art market cannot be rejected at least for the past 64 years.
Keywords: Art prices, Random walk, Asset pricing, Spectral density, Variance ratio
JEL Classification: G12, G14, C14
Suggested Citation: Suggested Citation