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The Auction Market For Modern Prints: Confirmations, Contradictions, And New Puzzles

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  • JAMES E. PESANDO
  • PAULINE M. SHUM

Abstract

"Using a large data set with 80,214 repeat sales, we find that the real return on a diversified portfolio of modern prints sold at auctions worldwide averaged a modest 1.51% during the period 1977-2004. We address several issues regarding the performance of modern prints as investments: the selection bias arising from the self-interest of auction houses; the impact of an ever-expanding universe of auction houses on investment returns; the "masterpiece" effect, or whether more expensive works of art outperform the market as a whole; and the differences in returns that arise due to random fluctuations in collector tastes." ("JEL" Z11, G11, G14) Copyright (c) 2007 Western Economic Association International.

Suggested Citation

  • James E. Pesando & Pauline M. Shum, 2008. "The Auction Market For Modern Prints: Confirmations, Contradictions, And New Puzzles," Economic Inquiry, Western Economic Association International, vol. 46(2), pages 149-159, April.
  • Handle: RePEc:bla:ecinqu:v:46:y:2008:i:2:p:149-159
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    References listed on IDEAS

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    1. David W. Galenson & Bruce A. Weinberg, 2000. "Age and the Quality of Work: The Case of Modern American Painters," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 761-777, August.
    2. Pesando, James E, 1993. "Art as an Investment: The Market for Modern Prints," American Economic Review, American Economic Association, vol. 83(5), pages 1075-1089, December.
    3. Frey, Bruno S. & Eichenberger, Reiner, 1995. "On the rate of return in the art market: Survey and evaluation," European Economic Review, Elsevier, vol. 39(3-4), pages 528-537, April.
    4. Jianping Mei & Michael Moses, 2002. "Art as an Investment and the Underperformance of Masterpieces," American Economic Review, American Economic Association, vol. 92(5), pages 1656-1668, December.
    5. James Pesando & Pauline Shum, 1999. "The Returns to Picasso's Prints and to Traditional Financial Assets, 1977 to 1996," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 23(3), pages 181-190, August.
    6. Orley Ashenfelter & Kathryn Graddy, 2003. "Auctions and the Price of Art," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 763-787, September.
    7. Jianping Mei & Michael Moses, 2005. "Vested Interest and Biased Price Estimates: Evidence from an Auction Market," Journal of Finance, American Finance Association, vol. 60(5), pages 2409-2435, October.
    8. Richard J. Agnello, 2002. "Investment Returns and Risk for Art: Evidence from Auctions of American Paintings," Eastern Economic Journal, Eastern Economic Association, vol. 28(4), pages 443-463, Fall.
    9. 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.
    10. Benjamin J. Burton & Joyce P. Jacobsen, 1999. "Measuring Returns on Investments in Collectibles," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 193-212, Fall.
    11. 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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    Citations

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    Cited by:

    1. William N. Goetzmann & Luc Renneboog & Christophe Spaenjers, 2011. "Art and Money," American Economic Review, American Economic Association, pages 222-226.
    2. Jansson Johan, 2014. "Temporary events and spaces in the Swedish primary art market," Zeitschrift für Wirtschaftsgeographie, De Gruyter, vol. 58(1), pages 202-215, October.
    3. Ünsal Özdilek, 2013. "Visual autocorrelation of prices," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 37(2), pages 203-223, May.
    4. Luc Renneboog & Christophe Spaenjers, 2013. "Buying Beauty: On Prices and Returns in the Art Market," Management Science, INFORMS, pages 36-53.
    5. Penasse, J.N.G. & Renneboog, L.D.R., 2014. "Bubbles and Trading Frenzies : Evidence from the Art Market," Discussion Paper 2014-068, Tilburg University, Tilburg Law and Economic Center.
    6. Jianping Mei & Michael A. Moses & Zur B. Shapira & Lawrence J. White, 2010. "Loss Aversion? What Loss Aversion? Some Surprising Evidence from the Art Market," Working Papers 10-10, New York University, Leonard N. Stern School of Business, Department of Economics.
    7. Park, Heungju & Ju, Lan & Liang, Tianyu & Tu, Zhiyong, 2017. "Horizon analysis of art investments: Evidence from the Chinese market," Pacific-Basin Finance Journal, Elsevier, vol. 41(C), pages 17-25.
    8. Kräussl, Roman & Mirgorodskaya, Elizaveta, 2016. "The winner's curse on art markets," CFS Working Paper Series 564, Center for Financial Studies (CFS).

    More about this item

    JEL classification:

    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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