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Beauty is in the bid of the beholder: An empirical basis for style

Author

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  • Goetzmann, William N.
  • Jones, Peter W.
  • Maggioni, Mauro
  • Walden, Johan

Abstract

We develop a method for classification of works of art based on their price dynamics. The method is in the same spirit as factor models commonly used within financial economics. Factor models assume that price dynamics of assets are related to underlying fundamental characteristics. We assume that such characteristics exist for works of art, and that they are associated with what we intuitively think of as style. We use a clustering algorithm to group artists that represent similar styles. This algorithm is specifically well-suited for situations where statistical distributions are far from normal – a description we believe fits well with markets for art. We test the method empirically on a ten-year sample of price data for paintings by 58 artists. Even with this limited data set, we clearly identify five groups and show that these are related to a standard classification of style.

Suggested Citation

  • Goetzmann, William N. & Jones, Peter W. & Maggioni, Mauro & Walden, Johan, 2016. "Beauty is in the bid of the beholder: An empirical basis for style," Research in Economics, Elsevier, vol. 70(3), pages 388-402.
    • Handle: RePEc:eee:reecon:v:70:y:2016:i:3:p:388-402
    DOI: 10.1016/j.rie.2016.05.004
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    References listed on IDEAS

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    1. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
    2. Louis K. C. Chan & Hsiu-Lang Chen & Josef Lakonishok, 2002. "On Mutual Fund Investment Styles," Review of Financial Studies, Society for Financial Studies, vol. 15(5), pages 1407-1437.
    3. Yacine Aït-Sahalia & Jonathan A. Parker & Motohiro Yogo, 2004. "Luxury Goods and the Equity Premium," Journal of Finance, American Finance Association, vol. 59(6), pages 2959-3004, December.
    4. Lovo , Stefano & Spaenjers , Christophe, 2014. "Unique Durable Assets," HEC Research Papers Series 1037, HEC Paris.
    5. Brown, Stephen J. & Goetzmann, William N., 1997. "Mutual fund styles," Journal of Financial Economics, Elsevier, vol. 43(3), pages 373-399, March.
    6. 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.
    7. repec:hrv:faseco:30747193 is not listed on IDEAS
    8. Anderson, Robert C, 1974. "Paintings as an Investment," Economic Inquiry, Western Economic Association International, vol. 12(1), pages 13-26, March.
    9. Alok Kumar & Charles M.C. Lee, 2006. "Retail Investor Sentiment and Return Comovements," Journal of Finance, American Finance Association, vol. 61(5), pages 2451-2486, October.
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    Cited by:

    1. Hellmanzik, Christiane, 2016. "Historic art exhibitions and modern - day auction results," Research in Economics, Elsevier, vol. 70(3), pages 421-430.
    2. Federico Etro & Elena Stepanova, 2017. "Art Auctions and Art Investment in the Golden Age of British Painting," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(2), pages 191-225, May.
    3. repec:kap:jculte:v:43:y:2019:i:2:d:10.1007_s10824-019-09339-2 is not listed on IDEAS
    4. Agnello, Richard J., 2016. "Do U.S. paintings follow the CAPM? Findings disaggregated by subject, artist, and value of the work," Research in Economics, Elsevier, vol. 70(3), pages 403-411.

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