Buying Beauty: On Prices and Returns in the Art Market
AbstractThis paper investigates the evolution of prices and returns in the art market since the middle of the previous century. We first compile a comprehensive list of more than 10,000 artists and then build a dataset that contains information on more than 1.1 million auction sales of paintings, prints, and works on paper. We perform an extensive hedonic regression analysis that includes unique price-determining variables capturing amongst others: the artistâs reputation, the strength of the attribution to an artist, and the subject matter of the work. Based on the resulting price index, we conclude that art has appreciated in value by a moderate 4.03% per year, in real USD terms, between 1951 and 2007. During the art market boom period 2002-2007, prices augmented by 11.60% annually, which explains the increased attention to âart as an investmentâ. Furthermore, our results show that, over the last quarter of a century, prices of oil paintings and of post-war art have risen faster than the overall market. In contrast to earlier studies, we find evidence of a positive masterpiece effect: high-quality art makes a better investment. Our results are robust to alternative model specifications, and do not seem influenced by sample selection or survivorship biases. When comparing the long-term returns on art to those on financial assets, we find that art has underperformed stocks but outperformed bonds. However, between 1982 and 2007, bonds yielded higher average returns (at a lower risk) than art. Buyers of art should thus expect to reap non-pecuniary benefits rather than high financial returns, especially because the modest art returns are further diminished by substantial transaction costs.
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Bibliographic InfoPaper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2009-004.
Date of creation: 2009
Date of revision:
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Web page: http://www.tilburguniversity.nl/tilec/
Art investments; Art market; Art returns; Auction prices; Hedonic regressions; Longterm stock returns; Long-term bond returns; Masterpiece effect;
Other versions of this item:
- Renneboog, L.D.R. & Spaenjers, C., 2009. "Buying Beauty: On Prices and Returns in the Art Market," Discussion Paper 2009-15, Tilburg University, Center for Economic Research.
- G1 - Financial Economics - - General Financial Markets
- Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
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- Goetzmann, W. & Renneboog, L.D.R. & Spaenjers, C., 2010.
"Art and Money,"
2010-08, Tilburg University, Center for Economic Research.
- Goetzmann, W. & Renneboog, L.D.R. & Spaenjers, C., 2010. "Art and Money," Discussion Paper 2010-002, Tilburg University, Tilburg Law and Economic Center.
- William Goetzmann & Luc Renneboog & Christophe Spaenjers, 2009. "Art and Money," Yale School of Management Working Papers amz2426, Yale School of Management, revised 01 Jan 2010.
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2009-64, Tilburg University, Center for Economic Research.
- Dimson, Elroy & Spaenjers, Christophe, 2011. "Ex post: The investment performance of collectible stamps," Journal of Financial Economics, Elsevier, vol. 100(2), pages 443-458, May.
- Katherine Kiel & Katherine Tedesco, 2011. "Stealing History: How does Provenance Affect the Price of Antiquities?," Working Papers 1105, College of the Holy Cross, Department of Economics.
- Kim Oosterlinck, 2009. "The Price of Degenerate Art," Working Papers CEB 09-031.RS, ULB -- Universite Libre de Bruxelles.
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