Hedonic Pricing of Artworks: Evidence from German Paintings

38 Pages Posted: 6 Mar 2007

See all articles by Roman Kräussl

Roman Kräussl

Universite du Luxembourg - Department of Finance; Hoover Institution, Stanford University

Eduard Schellart

Vrije Universiteit Brussel (VUB)

Date Written: March 4, 2007


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

Kraeussl, 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)

Universite du Luxembourg - Department of Finance ( email )

L-1511 Luxembourg

Hoover Institution, Stanford University ( email )

Stanford, CA 94305
United States

Eduard Schellart

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
Brussels, 1050

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