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On the valuation of psychic returns to art market investments

Author

Listed:
  • Erdal Atukeren

    (ETH Zurich, KOF - Swiss Economic Institute)

  • Aylin Seçkin

    (Istanbul Bilgi University)

Abstract

Investing in art objects yields financial and psychic returns. The psychic returns arise since art has a superior consumption good aspect as well. The question is whether it is possible to measure the psychic returns. One valuation method for estimating the psychic returns to investing in artworks is their rental price. Here, we make use of the prices charged by a Canadian fine art company for its art rental services and calculate the implied psychic returns to be about 28 percent. Next, we review the finance-theoretic approaches to measuring the psychic returns to investing in artworks. We follow Hodgson and Vorkink's (2004, Canadian Journal of Economics) suggestion that the alpha parameter in the CAPM captures the extent of net psychic returns. The evidence on alpha from the art market applications of the CAPM coupled with the transaction cost data from international art auctions also suggests that the psychic returns to investing in artworks might amount to about 28 per cent.

Suggested Citation

  • Erdal Atukeren & Aylin Seçkin, 2007. "On the valuation of psychic returns to art market investments," Economics Bulletin, AccessEcon, vol. 26(5), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-07z10027
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    References listed on IDEAS

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    Cited by:

    1. Emrah Çevik & Erdal Atukeren & Turhan Korkmaz, 2013. "Nonlinearity and nonstationarity in international art market prices: evidence from Markov-switching ADF unit root tests," Empirical Economics, Springer, vol. 45(2), pages 675-695, October.

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    More about this item

    JEL classification:

    • Z1 - Other Special Topics - - Cultural Economics
    • G1 - Financial Economics - - General Financial Markets

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