Is There a Bubble in the Art Market?
26 Pages Posted: 8 May 2014 Last revised: 25 Feb 2016
Date Written: May 6, 2014
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: Suggested Citation