The Winner's Curse on Art Markets

35 Pages Posted: 26 Feb 2020

See all articles by Roman Kräussl

Roman Kräussl

Bayes Business School (formerly Cass); Hoover Institution, Stanford University

Elizaveta Mirgorodskaya

VU University Amsterdam

Date Written: February 07, 2020


We investigate the effect of overreaction in the fine art market. Using a unique sample of auction prices of modern prints, we define an overvalued (undervalued) print as a print that was bought for a price above (below) its high (low) auction pricing estimate. Based on the overreaction hypothesis, we predict that overvalued (undervalued) prints generate a negative (positive) excess return at a subsequent sale. Our empirical findings confirm our expectations. We report that prints that were bought for a price 10 percent above (below) its high (low) pricing estimate generate a positive (negative) excess return of 12 percent (17 percent) after controlling for the general price movement on the prints market. The price correction for overvalued (undervalued) prints is more pronounced during recessions (expansions).

Keywords: Overreaction, winner's curse, pricing estimates, repeat sale, auction, art market

JEL Classification: E32, G11, G14

Suggested Citation

Kraeussl, Roman and Mirgorodskaya, Elizaveta, The Winner's Curse on Art Markets (February 07, 2020). Available at SSRN: or

Roman Kraeussl (Contact Author)

Bayes Business School (formerly Cass) ( email )

106 Bunhill Row
United Kingdom

Hoover Institution, Stanford University ( email )

Stanford, CA 94305
United States

Elizaveta Mirgorodskaya

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV

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