The Computation of Prices Indices
While there are no significant investment characteristics that inhibit art from being considered as an asset, a major hurdle has long been the lack of a systematic measure of its financial performance. Due to its heterogeneity (each piece is different) and its infrequency of trading (the exact same piece does not come to the market very often), the determination of changes in market value is difficult to ascertain. Two estimation methods are commonly used to construct indices. Repeat-sales regression (RSR) uses prices of individual objects traded at two distinct moments in time. If the characteristics of an object do not change (which is usually so for collectibles), the heterogeneity issue is bypassed. The basic idea of the hedonic regression (HR) method is to regress prices on various attributes of objects (dimensions, artist, subject matter, etc.) and to use the residuals of the regression which can be considered as "characteristic-free prices" to compute the price index. The chapter deals with the basics of hedonic and repeat-sales estimators, and tries to interpret in economic terms what both are trying to achieve. It also goes into some more technical details which may be useful for researchers who want to construct such indices, and gives some guidelines on how to go about collecting data, and the choice between RSR and HR that this induces. Both methods are compared using simulated returns, pointing to which method should be used given the data at hand.
|This chapter was published in: ||This item is provided by Elsevier in its series Handbook of the Economics of Art and Culture with number
1-27.||Handle:|| RePEc:eee:artchp:1-27||Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description|
When requesting a correction, please mention this item's handle: RePEc:eee:artchp:1-27. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.