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Is There a Bubble in the Art Market?

26 Pages Posted: 8 May 2014 Last revised: 25 Feb 2016

Roman Kräussl

Luxembourg School of Finance; Emory University - Goizueta Business School

Thorsten Lehnert

Luxembourg School of Finance; Radboud University Nijmegen

Nicolas Martelin

Luxembourg School of Finance

Date Written: May 6, 2014

Abstract

The record-breaking prices observed in the art market over the last three years raise the question of whether we are experiencing a speculative bubble. Given the difficulty to determine the fundamental value of artworks, we apply a right-tailed unit root test with forward recursive regressions (SADF test) to detect explosive behaviors directly in the time series of four different art market segments (“Impressionist and Modern”, “Post-war and Contemporary”, “American”, and “Latin American”) for the period from 1970 to 2013. We identify two historical speculative bubbles and find an explosive movement in today’s “Post-war and Contemporary” and “American” fine art market segments.

Keywords: Art market, Alternative investments, Speculative bubbles, Explosive behavior

JEL Classification: G12, G14, Z11

Suggested Citation

Kräussl, Roman and Lehnert, Thorsten and Martelin, Nicolas, Is There a Bubble in the Art Market? (May 6, 2014). Journal of Empirical Finance, Vol. 35, 2016. Available at SSRN: https://ssrn.com/abstract=2433597 or http://dx.doi.org/10.2139/ssrn.2433597

Roman Kraeussl (Contact Author)

Luxembourg School of Finance ( email )

4, rue Albert Borschette
Luxembourg, 1246
Luxembourg
+3524666445442 (Phone)

HOME PAGE: http://www.art-finance.com

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States
+14042812253 (Phone)
+14047275238 (Fax)

HOME PAGE: http://www.art-finance.com

Thorsten Lehnert

Luxembourg School of Finance ( email )

4 Rue Albert Borschette
Luxembourg, L-1246
Luxembourg

Radboud University Nijmegen ( email )

Nijmegen, 6500 HK
Netherlands

Nicolas Martelin

Luxembourg School of Finance ( email )

4, rue Albert Borschette
Luxembourg, 1246
Luxembourg

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