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Reconsidering psychic return in art investments

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Listed:
  • Candela, Guido
  • Castellani, Massimiliano
  • Pattitoni, Pierpaolo

Abstract

Measuring the psychic return of art investments is a debated issue in cultural economics. Several works suggest Jensen’s alpha as a measure of the psychic return. Since Jensen’s alpha is defined in the CAPM framework, its uncritical application as a measure of the psychic return may be problematic when the CAPM hypotheses do not hold. Applying an opportunity cost framework and the analytical tools of portfolio theory, we propose a new psychic return measure, which is not affected by the same issues as Jensen’s alpha. Psychic return estimates based on our measure are provided for several art market indexes as an empirical application.

Suggested Citation

  • Candela, Guido & Castellani, Massimiliano & Pattitoni, Pierpaolo, 2013. "Reconsidering psychic return in art investments," Economics Letters, Elsevier, vol. 118(2), pages 351-354.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:2:p:351-354
    DOI: 10.1016/j.econlet.2012.11.010
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    References listed on IDEAS

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    1. Michael F. Bryan, 1985. "Beauty and the bulls: the investment characteristics of paintings," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 2-10.
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    3. O. Chanel & L. A. Gerard-Varet & V. Ginsburgh, 1994. "Prices and Returns on Paintings: An Exercise on How to Price the Priceless," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 19(1), pages 7-21, June.
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    8. Stein, John Picard, 1977. "The Monetary Appreciation of Paintings," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 1021-1035, October.
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    Cited by:

    1. Francesco Angelini & Massimiliano Castellani & Lorenzo Zirulia, 2022. "Overconfidence in the art market: a bargaining pricing model with asymmetric disinformation," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(3), pages 961-988, October.

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    More about this item

    Keywords

    Psychic return; Art investment; Portfolio theory;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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