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Financial returns, price determinants, and genre effects in American art investment

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  • Richard Agnello
  • Renée Pierce

Abstract

Past studies on art investment, generally have found that returns are low and risk is high. In this study we find that the return to art investment is more in line with traditional investments and thus the cost for consumption associated with art seems fairly small. Employing a large sample of paintings by 66 American artists sold at auction between 1971–1992, average returns are found to be over 9 per cent and 3 per cent in nominal and real terms, respectively. The model employs a log linear price regression estimated by pooled cross section and time series data, and allows rates of return as well as hedonic values for various painting and auction attributes to be estimated. These include size, media, age of execution, authenticity of the work, and auction month and house. In addition, rates of return are differentiated by artist, time period of investment, price range and genre of the painting. The findings indicate significant sensitivity of rates of return to these data stratifications. Copyright Kluwer Academic Publishers 1996

Suggested Citation

  • Richard Agnello & Renée Pierce, 1996. "Financial returns, price determinants, and genre effects in American art investment," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 20(4), pages 359-383, December.
  • Handle: RePEc:kap:jculte:v:20:y:1996:i:4:p:359-383
    DOI: 10.1007/s10824-005-0383-0
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    References listed on IDEAS

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    1. Buelens, Nathalie & Ginsburgh, Victor, 1993. "Revisiting Baumol's 'art as floating crap game'," European Economic Review, Elsevier, vol. 37(7), pages 1351-1371, October.
    2. Ashenfelter, Orley, 1989. "How Auctions Work for Wine and Art," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 23-36, Summer.
    3. Ginsburgh, Victor & Jeanfils, Philippe, 1995. "Long-term comovements in international markets for paintings," European Economic Review, Elsevier, vol. 39(3-4), pages 538-548, April.
    4. Anderson, Robert C, 1974. "Paintings as an Investment," Economic Inquiry, Western Economic Association International, vol. 12(1), pages 13-26, March.
    5. Olivier Chanel & Louis-André Gérard-Varet & Victor Ginsburgh, 1996. "The relevance of hedonic price indices," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 20(1), pages 1-24, March.
    6. Ashenfelter, Orley & Genesove, David, 1992. "Testing for Price Anomalies in Real-Estate Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 501-505, May.
    7. Goetzmann, William N, 1993. "Accounting for Taste: Art and the Financial Markets over Three Centuries," American Economic Review, American Economic Association, vol. 83(5), pages 1370-1376, December.
    8. Chanel, O. & Gerard, L.A. & Ginsburgh, V., 1992. "The Relevence of Hedonic Price Indices the Case of Paintings," G.R.E.Q.A.M. 92a19, Universite Aix-Marseille III.
    9. 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.
    10. 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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