Art as an Investment and the Underperformance of Masterpieces

NYU Finance Working Paper No. 01-012

23 Pages Posted: 31 May 2002

See all articles by Jianping Mei

Jianping Mei

New York University (NYU) - Department of Finance

Michael Moses

ART MARKET CONSULTANCY

Multiple version iconThere are 2 versions of this paper

Date Written: February 2002

Abstract

This paper constructs a new data set of repeated sales of artworks and estimates an annual index of art prices for the period 1875-2000. Contrary to earlier studies, we find art outperforms fixed income securities as an investment, though it significantly under-performs stocks in the US. Art is also found to have lower volatility and lower correlation with other assets, making it more attractive for portfolio diversification than discovered in earlier research. There is strong evidence of underperformance of masterpieces, meaning expensive paintings tend to under-perform the art market index. The evidence is mixed on whether the "law of one price" holds in the New York auction market.

Keywords: masterpiece effect, Repeated sales regression

JEL Classification: G11, G12, Z10

Suggested Citation

Mei, Jianping and Moses, Michael, Art as an Investment and the Underperformance of Masterpieces (February 2002). NYU Finance Working Paper No. 01-012. Available at SSRN: https://ssrn.com/abstract=311701 or http://dx.doi.org/10.2139/ssrn.311701

Jianping Mei (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0354 (Phone)
212-995-4221 (Fax)

Michael Moses

ART MARKET CONSULTANCY ( email )

20 WEST 64TH STREET
APT 26K
NEW YORK, NY 10023
United States

HOME PAGE: http://www.stern.nyu.edu/om/faculty/moses/

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