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The monetary appreciation of paintings: from realism to Magritte

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  • Luc Renneboog

Abstract

This study investigates how investments in paintings compare with those in stocks in terms of risk--return trade-off using Sharpe and Treynor ratios and Markowitz efficient frontiers. A large database was analysed consisting of more than 10,500 auction prices of Belgian paintings over the period 1970--97. These paintings are the auctioned oeuvre of 71 internationally recognised painters representing the main artistic schools (from social realism to surrealism) over the period 1850--1950. Hedonic art returns are corrected for auction location and auction house, artistic school, painters' reputation, medium, signature and painting size. Surrealism and luminism have been the most popular currents of art (in monetary terms), while expressionism and symbolism have gained (financial) esteem. This study concludes that art investments underperform equity market investments owing to the high risk of investing in art and its high transaction costs, resale rights and insurance premia. In addition, the Markowitz efficient frontier shows limited diversification potential for art. Copyright 2002, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 26 (2002)
Issue (Month): 3 (May)
Pages: 331-358

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Handle: RePEc:oup:cambje:v:26:y:2002:i:3:p:331-358

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References

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  1. Chanel, O. & Gerard-Varet, L.A. & Ginsburgh, V., 1993. "Prices and Returns on Paintings and Exercise on How to Price the Priceless," G.R.E.Q.A.M. 93b01, Universite Aix-Marseille III.
  2. Gerard-Varet, Louis-Andre, 1995. "On pricing the priceless: Comments on the economics of the visual art market," European Economic Review, Elsevier, vol. 39(3-4), pages 509-518, April.
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Cited by:
  1. Nicoletta MARINELLI & Giulio PALOMBA, 2008. "A Model for Pricing the Italian Contemporary Art Paintings at Auction," Working Papers 316, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  2. Andrew C. Worthington & Helen Higgs, 2003. "Risk, return and portfolio diversification in major painting markets: The application of conventional financial analysis to unconventional investments," School of Economics and Finance Discussion Papers and Working Papers Series 148, School of Economics and Finance, Queensland University of Technology.
  3. repec:ebl:ecbull:v:26:y:2006:i:5:p:1-10 is not listed on IDEAS
  4. Charlin, Ventura & Cifuentes, Arturo, 2013. "A new financial metric for the art market," MPRA Paper 50186, University Library of Munich, Germany.
  5. Marilena Locatelli-Biey & Roberto Zanola, 2002. "The Sculpture Market: An Adjacent Year Regression Index," Journal of Cultural Economics, Springer, vol. 26(1), pages 65-78, February.
  6. Kraeussl, Roman & Logher, Robin, 2010. "Emerging art markets," Emerging Markets Review, Elsevier, vol. 11(4), pages 301-318, December.
  7. Roman Kraeussl & Christian Wiehenkamp, 2012. "A call on art investments," Review of Derivatives Research, Springer, vol. 15(1), pages 1-23, April.
  8. Helen Higgs & Andrew C Worthington, 2004. "Financial returns and price determinants in the Australian art market, 1973-2003," School of Economics and Finance Discussion Papers and Working Papers Series 184, School of Economics and Finance, Queensland University of Technology.
  9. Helen Higgs & John Forster, 2014. "The auction market for artworks and their physical dimensions: Australia—1986 to 2009," Journal of Cultural Economics, Springer, vol. 38(1), pages 85-104, February.
  10. Locatelli-Biey, Marilena & Zanola, Roberto, 2000. "The Market for Sculptures: an Adjacent Year Regression Index," POLIS Working Papers 14, Institute of Public Policy and Public Choice - POLIS.
  11. Andrew Worthington & Helen Higgs, 2006. "A Note on Financial Risk, Return and Asset Pricing in Australian Modern and Contemporary Art," Journal of Cultural Economics, Springer, vol. 30(1), pages 73-84, March.
  12. Rita Kottasz & Roger Bennett, 2005. "The impact of ethnocentrism on perceived reputation and emotional liking of artworks: A comparative analysis," International Review on Public and Nonprofit Marketing, Springer, vol. 2(2), pages 9-21, December.
  13. Kräussl, Roman & Elsland, Niels van, 2008. "Constructing the true art market index: A novel 2-step hedonic approach and its application to the German art market," CFS Working Paper Series 2008/11, Center for Financial Studies (CFS).
  14. Taylor, Dominic & Coleman, Les, 2011. "Price determinants of Aboriginal art, and its role as an alternative asset class," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1519-1529, June.
  15. Joonwoo Nahm, 2010. "Price determinants and genre effects in the Korean art market: a partial linear analysis of size effect," Journal of Cultural Economics, Springer, vol. 34(4), pages 281-297, November.
  16. Marinelli, Nicoletta & Palomba, Giulio, 2011. "A model for pricing Italian Contemporary Art paintings at auction," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(2), pages 212-224, May.

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