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A new financial metric for the art market

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  • Charlin, Ventura
  • Cifuentes, Arturo
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    Abstract

    This paper introduces a new financial metric for the art market. The metric, which we call Artistic Power Value (APV), is based on the price per unit of area (dollars per square centimeter) and is applicable to two-dimensional art objects such as paintings. In addition to its intuitive appeal and ease of computation, this metric has several advantages from the investor’s viewpoint. For example, it makes it easy to: (i) estimate price ranges for different artists; (ii) perform comparisons among them; (iii) follow the evolution of the artists’ creativity cycle overtime; and (iiii) compare, for a single artist, paintings with different subjects or different geometric properties. Additionally, the APV facilitates the process of estimating total returns. Finally, due to its transparency, the APV can be used to design derivatives-like instruments that can appeal to both, investors and speculators. Several examples validate this metric and demonstrate its usefulness.

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    File URL: http://mpra.ub.uni-muenchen.de/52042/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50186.

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    Date of creation: 23 Sep 2013
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    Handle: RePEc:pra:mprapa:50186

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    Related research

    Keywords: Art markets Hedonic pricing Paintings Auction prices Alternative Investments;

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    References

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    1. Pesando, James E, 1993. "Art as an Investment: The Market for Modern Prints," American Economic Review, American Economic Association, vol. 83(5), pages 1075-89, December.
    2. repec:ebl:ecbull:v:26:y:2006:i:5:p:1-10 is not listed on IDEAS
    3. Baumol, William J, 1986. "Unnatural Value: Or Art Investment as Floating Crap Game," American Economic Review, American Economic Association, vol. 76(2), pages 10-14, May.
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    14. Andrew C. Worthington & Helen Higgs, 2004. "Art as an investment: risk, return and portfolio diversification in major painting markets," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(2), pages 257-271.
    15. Kathryn Graddy & Orley Ashenfelter, 2002. "Auctions and the Price of Art," Economics Series Working Papers 131, University of Oxford, Department of Economics.
    16. David W. Galenson, 1999. "The Lives of the Painters of Modern Life: The Careers of Artists in France from Impressionism to Cubism," NBER Working Papers 6888, National Bureau of Economic Research, Inc.
    17. Anderson, Robert C, 1974. "Paintings as an Investment," Economic Inquiry, Western Economic Association International, vol. 12(1), pages 13-26, March.
    18. 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.
    19. Luc Renneboog & Christophe Spaenjers, 2013. "Buying Beauty: On Prices and Returns in the Art Market," Management Science, INFORMS, vol. 59(1), pages 36-53, February.
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