Testing the Efficiency of the Art Market Using Quantile‐Based Unit Root Tests with Sharp and Smooth Breaks

24 Pages Posted: 13 Jun 2018

See all articles by Goodness Aye

Goodness Aye

University of Pretoria - Department of Economics

Tsang Yao Chang

Feng Chia University

Wen‐Yi Chen

National Taichung University of Science and Technology

Rangan Gupta

University of Pretoria - Department of Economics

Mark E. Wohar

University of Nebraska at Omaha

Date Written: July 2018

Abstract

This paper examines the efficiency market hypothesis for the art market using a novel nonlinear quantile‐based unit root test while accounting for sharp shifts and smooth breaks in the data. We use quarterly data which covers 1998:1 and 2015:1. Our analysis is based on 15 art price indices: Contemporary, Drawings, France, Global index (Euro), Global index (USD), Modern art, Nineteenth century, Old Masters, Paintings, Photographies, Postwar, Prints, Sculptures, UK and US. We find evidence of structural shifts and nonlinearity in the art indices. We cannot reject the null of unit root and/or stationarity in the art series based on the conventional linear unit root tests and quantile‐based test that did not account for structural breaks. However, when we use the same methods but accounting for sharp shifts and smooth breaks, we are able to reject the unit root null for each of the art indices. Further we find evidence of asymmetric behaviour in some of the indices: two global indices, Paintings, Prints, Sculptures, Modern art and Postwar, where unit root exist at some quantiles but not at others. Overall, our result suggest that the art market is inefficient. We provide some practical and policy implications of our findings.

Suggested Citation

Aye, Goodness and Chang, Tsang Yao and Chen, Wen‐Yi and Gupta, Rangan and Wohar, Mark E., Testing the Efficiency of the Art Market Using Quantile‐Based Unit Root Tests with Sharp and Smooth Breaks (July 2018). The Manchester School, Vol. 86, Issue 4, pp. 488-511, 2018. Available at SSRN: https://ssrn.com/abstract=3194921 or http://dx.doi.org/10.1111/manc.12192

Goodness Aye (Contact Author)

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Tsang Yao Chang

Feng Chia University

100 Wenhwa Road
Talchung
Taiwan

Wen‐Yi Chen

National Taichung University of Science and Technology

No.129,Sec.3
Sanmin Road, North District
Taichung City, 404
Taiwan

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Mark E. Wohar

University of Nebraska at Omaha ( email )

Department of Economics
6708 Pine Street MH 332S
Omaha, NE 68182
United States
402-554-3712 (Phone)
402-554-2853 (Fax)

HOME PAGE: http://cba.unomaha.edu/faculty/mwohar/WEB/homepage.html

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