Consistency and discrepancy in fine art investment: upward bias in investors’ expectation

Purpose - Art investment is generally believed to be risky with a high expected return. In this paper, we empirically find that art investors’ behavior is consistent with this general belief, showing consistency between their perception and behavior. Design/methodology/approach - Using the Fama–French asset pricing factor models, we conduct an empirical investigation into fine arts investment in relation to financial risk factors. The risk and return profiles of art investments are then compared with those of traditional investments to determine alignment with investor perceptions. Findings - We find that art investment is riskier than other traditional assets but does not provide enough financial gain to compensate the art investor, which indicates that it is not as attractive as it is believed. While there is consistency between art investors’ perception and behavior, there is also a discrepancy between their perception and reality. Originality/value - The research identifies potential reasons for this misperception and highlights the non-monetary benefits and hidden sources of utility, suggesting that art investors may still be rational despite the less attractive financial performance compared to traditional assets.