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Hedonic Pricing of Artworks: Evidence from German Paintings

38 Pages Posted: 6 Mar 2007  

Roman Kräussl

Luxembourg School of Finance; Emory University - Goizueta Business School

Eduard Schellart

Vrije Universiteit Brussel (VUB)

Date Written: March 4, 2007

Abstract

This paper evaluates whether art might be a serious alternative to current standard asset classes like equities and bonds. We estimate the annual risk and return on German paintings, calculate what drives return on German paintings and evaluate whether German paintings can serve as a useful function in a well-diversified portfolio. This paper uses a unique data set, containing 1,688 auction price data for 23 'major' German painters over the period between January 1986 and November 2006. Hedonic regression results indicate that paintings by major German artists have yielded an annual geometric (nominal) return of merely 1.6% over this period. This paper finds that these paintings, despite their positive return and low correlation with the German equity market, should not be included in an optimal portfolio as an alternative investment and should be kept, merely, for their aesthetic return.

Keywords: Investing in art, alternative investments, hedonic regression, portfolio diversification, auction price records

JEL Classification: G11, G14

Suggested Citation

Kräussl, Roman and Schellart, Eduard, Hedonic Pricing of Artworks: Evidence from German Paintings (March 4, 2007). Available at SSRN: https://ssrn.com/abstract=968198 or http://dx.doi.org/10.2139/ssrn.968198

Roman Kraeussl (Contact Author)

Luxembourg School of Finance ( email )

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

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

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States
+14042812253 (Phone)
+14047275238 (Fax)

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

Eduard Schellart

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

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