Machines and Masterpieces: Predicting Prices in the Art Auction Market

32 Pages Posted: 20 Mar 2019

See all articles by Mathieu Aubry

Mathieu Aubry

Ecole Nationale des Ponts et Chaussées (ENPC)

Roman Kräussl

Luxembourg School of Finance; Hoover Institution, Stanford University

Gustavo Manso

University of California, Berkeley - Haas School of Business

Christophe Spaenjers

HEC Paris - Finance Department

Date Written: March 5, 2019

Abstract

We study the accuracy and usefulness of automated (i.e., machine-generated) valuations for illiquid and heterogeneous assets. We assemble a database of 1.1 million paintings that were auctioned between 2008 and 2015. We use a popular machine-learning technique—neural networks—to develop a price prediction algorithm based on both non-visual and visual artwork characteristics. Our out-of-sample valuations predict auction prices dramatically better than valuations based on a standard hedonic pricing model. Moreover, they help explaining price levels and sale probabilities even after conditioning on auctioneers’ pre-sale estimates. Machine learning is particularly helpful for assets that are associated with higher levels of ex-ante price uncertainty. Finally, we show that it can help overcome experts’ systematic biases in expectations formation.

Keywords: asset valuation, auctions, experts, big data, machine learning, computer vision, art

JEL Classification: C50, D44, G12, Z11

Suggested Citation

Aubry, Mathieu and Kraeussl, Roman and Manso, Gustavo and Spaenjers, Christophe, Machines and Masterpieces: Predicting Prices in the Art Auction Market (March 5, 2019). Available at SSRN: https://ssrn.com/abstract=3347175 or http://dx.doi.org/10.2139/ssrn.3347175

Mathieu Aubry

Ecole Nationale des Ponts et Chaussées (ENPC) ( email )

28, rue des Saints-Peres
75343 Paris Cedex 07
France

HOME PAGE: http://imagine.enpc.fr/~aubrym/

Roman Kraeussl

Luxembourg School of Finance ( email )

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

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

Hoover Institution, Stanford University ( email )

Stanford, CA 94305
United States

Gustavo Manso

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Christophe Spaenjers (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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