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Performance analysis of investing in Chinese oil paintings based on a hedonic regression model of price index

Author

Listed:
  • Fang Wang
  • Xu Zheng

Abstract

Purpose - The purpose of this paper is to construct a price index for Chinese oil paintings and analyze the financial performance of investing in Chinese oil paintings and its potential for portfolio diversification in Chinese financial markets. Design/methodology/approach - A hedonic regression model is applied to construct a semiannual price index for Chinese oil paintings from 2000 to 2014. The CAPM model, downsideβand standard portfolio optimization are used for analyzing portfolio diversification. Findings - The hedonic regression shows that the majority of hedonic variables, such as dimension, artist’s reputation, living status, medium and auction houses, are statistically significant in estimation. Not only the return from oil painting investments is higher than other equities, but also theβcoefficient of the CAPM model and downsideβindicate that Chinese oil painting may be a good hedging instrument against stock market risk. Furthermore, the portfolio optimizations under standard assumptions suggest that oil paintings as an alternative investment provide diversification benefit. Originality/value - This paper provides a new and comprehensive analysis of characteristics and risks of investing in the Chinese oil paintings.

Suggested Citation

  • Fang Wang & Xu Zheng, 2017. "Performance analysis of investing in Chinese oil paintings based on a hedonic regression model of price index," China Finance Review International, Emerald Group Publishing Limited, vol. 7(3), pages 323-342, August.
    • Handle: RePEc:eme:cfripp:cfri-03-2016-0009
    DOI: 10.1108/CFRI-03-2016-0009
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    Citations

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    Cited by:

    1. Chin Tiong Cheng & Gabriel Hoh Teck Ling & Yee-Siang Gan & Wai Fang Wong & Kong Seng Lai, 2021. "Revisiting Investability of Heritage Properties through Indexation and Portfolio Frontier Analysis," Risks, MDPI, vol. 9(5), pages 1-16, May.
    2. Cyprian Chwiałkowski & Adam Zydroń, 2021. "Socio-Economic and Spatial Characteristics of Wielkopolski National Park: Application of the Hedonic Pricing Method," Sustainability, MDPI, vol. 13(9), pages 1-17, April.

    More about this item

    Keywords

    Portfolio diversification; Alternative investment; Chinese oil paintings; Hedonic regression; C13; G11;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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