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The monetary appreciation of paintings: from realism to Magritte

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  • Luc Renneboog

Abstract

This study investigates how investments in paintings compare with those in stocks in terms of risk--return trade-off using Sharpe and Treynor ratios and Markowitz efficient frontiers. A large database was analysed consisting of more than 10,500 auction prices of Belgian paintings over the period 1970--97. These paintings are the auctioned oeuvre of 71 internationally recognised painters representing the main artistic schools (from social realism to surrealism) over the period 1850--1950. Hedonic art returns are corrected for auction location and auction house, artistic school, painters' reputation, medium, signature and painting size. Surrealism and luminism have been the most popular currents of art (in monetary terms), while expressionism and symbolism have gained (financial) esteem. This study concludes that art investments underperform equity market investments owing to the high risk of investing in art and its high transaction costs, resale rights and insurance premia. In addition, the Markowitz efficient frontier shows limited diversification potential for art. Copyright 2002, Oxford University Press.

Suggested Citation

  • Luc Renneboog, 2002. "The monetary appreciation of paintings: from realism to Magritte," Cambridge Journal of Economics, Oxford University Press, vol. 26(3), pages 331-358, May.
  • Handle: RePEc:oup:cambje:v:26:y:2002:i:3:p:331-358
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    Cited by:

    1. Locatelli-Biey, Marilena & Zanola, Roberto, 2000. "The Market for Sculptures: an Adjacent Year Regression Index," POLIS Working Papers 14, Institute of Public Policy and Public Choice - POLIS.
    2. Rita Kottasz & Roger Bennett, 2005. "The impact of ethnocentrism on perceived reputation and emotional liking of artworks: A comparative analysis," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 2(2), pages 9-21, December.
    3. Kraeussl, Roman & Logher, Robin, 2010. "Emerging art markets," Emerging Markets Review, Elsevier, vol. 11(4), pages 301-318, December.
    4. Nicoletta Marinelli & Giulio Palomba, . "A Model for Pricing the Italian Contemporary Art Paintings at Auction," EHUCHAPS, Universidad del País Vasco - Facultad de Ciencias Económicas y Empresariales.
    5. Luc Renneboog & Christophe Spaenjers, 2013. "Buying Beauty: On Prices and Returns in the Art Market," Management Science, INFORMS, vol. 59(1), pages 36-53, February.
    6. Anna Lucińska, 2015. "The Art Market in the European Union," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 21(1), pages 67-79, March.
    7. repec:kap:iaecre:v:21:y:2015:i:1:p:67-79 is not listed on IDEAS
    8. Kräussl, Roman & Elsland, Niels van, 2008. "Constructing the true art market index: A novel 2-step hedonic approach and its application to the German art market," CFS Working Paper Series 2008/11, Center for Financial Studies (CFS).
    9. Charlin, Ventura & Cifuentes, Arturo, 2013. "A new financial metric for the art market," MPRA Paper 50186, University Library of Munich, Germany.
    10. Andrew Worthington & Helen Higgs, 2006. "A Note on Financial Risk, Return and Asset Pricing in Australian Modern and Contemporary Art," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 30(1), pages 73-84, March.
    11. Taylor, Dominic & Coleman, Les, 2011. "Price determinants of Aboriginal art, and its role as an alternative asset class," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1519-1529, June.
    12. Kompa Krzysztof & Witkowska Dorota, 2014. "Construction Of Hedonic Price Index For The “Most Liquid” Polish Painters," Folia Oeconomica Stetinensia, Sciendo, vol. 14(2), pages 76-100, December.
    13. Roman Kraeussl & Christian Wiehenkamp, 2012. "A call on art investments," Review of Derivatives Research, Springer, vol. 15(1), pages 1-23, April.
    14. McQuillan, William & Lucey, Brian, 2016. "The validity of Islamic art as an investment," Research in International Business and Finance, Elsevier, vol. 36(C), pages 388-401.
    15. William Goetzmann & Elena Mamonova & Christophe Spaenjers, 2014. "The Economics of Aesthetics and Three Centuries of Art Price Records," NBER Working Papers 20440, National Bureau of Economic Research, Inc.
    16. Marilena Locatelli-Biey & Roberto Zanola, 2002. "The Sculpture Market: An Adjacent Year Regression Index," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 26(1), pages 65-78, February.
    17. repec:eee:ecmode:v:68:y:2018:i:c:p:340-355 is not listed on IDEAS
    18. Helen Higgs & Andrew Worthington, 2005. "Financial Returns and Price Determinants in the Australian Art Market, 1973-2003," The Economic Record, The Economic Society of Australia, vol. 81(253), pages 113-123, June.
    19. Joonwoo Nahm, 2010. "Price determinants and genre effects in the Korean art market: a partial linear analysis of size effect," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 34(4), pages 281-297, November.
    20. Andrew C. Worthington & Helen Higgs, 2003. "Risk, return and portfolio diversification in major painting markets: The application of conventional financial analysis to unconventional investments," School of Economics and Finance Discussion Papers and Working Papers Series 148, School of Economics and Finance, Queensland University of Technology.
    21. Helen Higgs & John Forster, 2014. "The auction market for artworks and their physical dimensions: Australia—1986 to 2009," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 38(1), pages 85-104, February.
    22. Marinelli, Nicoletta & Palomba, Giulio, 2011. "A model for pricing Italian Contemporary Art paintings at auction," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(2), pages 212-224, May.
    23. Pownall, Rachel A.J. & Graddy, Kathryn, 2016. "Pricing color intensity and lightness in contemporary art auctions," Research in Economics, Elsevier, vol. 70(3), pages 412-420.
    24. repec:ebl:ecbull:v:26:y:2006:i:5:p:1-10 is not listed on IDEAS

    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • Z1 - Other Special Topics - - Cultural Economics

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