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The 1980s Price Bubble on (Post) Impressionism

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  • Fabian Bocart

    ()
    (Universite Catholique de Louvain, Institut de Statistique, Biostatistique et Sciences Actuarielles, Voie du Roman Pays 20, 1348 Louvain-La-Neuve, Belgium)

  • Ken Bastiaensen

    ()

  • Peter Cauwels

    ()
    (ETH Zurich, Department of Management, Technology, and Economics, Zurich, Switzerland)

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    Abstract

    The Log Periodic Power Law is a model used to define and measure speculative bubbles. This model has proven useful to track bubbles and even predict crashes of liquid asset classes. Using this methodology coupled with properties of cointegration between stocks and art, the 1980s price bubble on Impressionism and Post-Impressionism is analyzed. It is shown formally that there was a bubble in this market between 1986 and 1989. However, when denominating the art index in JPY rather than in USD, no price bubble behaviour was found at all. This observation suggests that Japanese buyers never felt that they were riding a bubble. Despite popular beliefs, no evidence is found that Japanese buyers viewed art as a speculative vehicle instead of a more classic consumption good that was related to their own cultural heritage.

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    File URL: http://www.culturaleconomics.org/awp/AWP-03-2011.pdf
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    Bibliographic Info

    Paper provided by the Association for Cultural Economics International in its series ACEI Working Paper Series with number AWP-03-2011.

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    Length: 37 pages
    Date of creation: Nov 2011
    Date of revision: Nov 2011
    Handle: RePEc:cue:wpaper:awp-03-2011

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    Web page: http://www.culturaleconomics.org/
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    Related research

    Keywords: Impressionism; art market; hedonic regression; LPPL; bubble;

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    2. David W. Galenson & Bruce A. Weinberg, 2001. "Creating Modern Art: The Changing Careers of Painters in France from Impressionism to Cubism," American Economic Review, American Economic Association, vol. 91(4), pages 1063-1071, September.
    3. Goetzmann, W. & Renneboog, L.D.R. & Spaenjers, C., 2010. "Art and Money," Discussion Paper 2010-08, Tilburg University, Center for Economic Research.
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    8. Lei, V. & Noussair, C. & Plott, C.R., 1998. "Non-Speculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality Vs. Actual Irrationality," Purdue University Economics Working Papers 1120, Purdue University, Department of Economics.
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    11. Madeleine DE LA BARRE & Sophie DOCCLO & Victor GINSBURGH, 1994. "Returns of Impressionist, Modern and Contemporary European Paintings 1962-1991," Annales d'Economie et de Statistique, ENSAE, issue 35, pages 143-181.
    12. Andrew C. Worthington & Helen Higgs, 2001. "Art as an Investment: Risk, Return and Comovements in Major Painting Markets," School of Economics and Finance Discussion Papers and Working Papers Series 093, School of Economics and Finance, Queensland University of Technology.
    13. Leslie Singer & Gary Lynch, 1997. "Are Multiple Art Markets Rational?," Journal of Cultural Economics, Springer, vol. 21(3), pages 197-218, September.
    14. Douglas Hodgson & Keith Vorkink, 2004. "Asset pricing theory and the valuation of Canadian paintings," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 629-655, August.
    15. Bertrand Roehner & D. Sornette, 1999. "Analysis of the phenomenon of speculative trading in one of its basic manifestations: postage stamp bubbles," Papers cond-mat/9906435, arXiv.org.
    16. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2011. "Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 562-588, October.
    17. Ginsburgh, Victor & Mei, Jianping & Moses, Michael, 2006. "The Computation of Prices Indices," Handbook of the Economics of Art and Culture, Elsevier.
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