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Econometric analysis of volatile art markets

Author

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  • BOCART, Fabian Y. R. P.

    (Université catholique de Louvain, Institut de statistique, biostatistique et sciences actuarielles, B-1348 Louvain-la-Neuve, Belgium)

  • HAFNER, Christian

    (Université catholique de Louvain, CORE and Institut de statistique, biostatistique et sciences actuarielles, B-1348 Louvain-la-Neuve, Belgium)

Abstract

A new heteroskedastic hedonic regression model is suggested. It takes into account time-varying volatility and is applied to a blue chips art market. Furthermore, a nonparametric local likelihood estimator is used. This estimator is more precise than the often used dummy variables method. The empirical analysis reveals that errors are considerably non-Gaussian, and that a student distribution with time-varying scale and degrees of freedom does well in explaining deviations of prices from their expectation. The art price index is a smooth function of time and has a variability that is comparable to the volatility of stock indices.

Suggested Citation

  • BOCART, Fabian Y. R. P. & HAFNER, Christian, 2011. "Econometric analysis of volatile art markets," LIDAM Discussion Papers CORE 2011052, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2011052
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    References listed on IDEAS

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    Cited by:

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    2. Bocart, Fabian Y. R. P. & Hafner, Christian M., 2012. "Volatility of price indices for heterogeneous goods," SFB 649 Discussion Papers 2012-039, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    3. Kim Oosterlinck, 2017. "Art as a Wartime Investment: Conspicuous Consumption and Discretion," Economic Journal, Royal Economic Society, vol. 127(607), pages 2665-2701, December.
    4. Bocart, Fabian Y.R.P. & Hafner, Christian M., 2015. "Fair Revaluation of Wine as an Investment," Journal of Wine Economics, Cambridge University Press, vol. 10(2), pages 190-203, November.
    5. Vecco, Marilena & Zanola, Roberto, 2017. "Don’t let the easy be the enemy of the good. Returns from art investments: What is wrong with it?," Journal of Economic Behavior & Organization, Elsevier, vol. 140(C), pages 120-129.
    6. David Chambers & Elroy Dimson & Christophe Spaenjers, 0. "Art as an Asset: Evidence from Keynes the Collector," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 10(3), pages 490-520.
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    10. Filipiak Dominik & Filipowska Agata, 2016. "Towards Data Oriented Analysis of the Art Market: Survey and Outlook," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 12(1), pages 21-31.
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    16. Shailendra Gurjar & Usha Ananthakumar, 2023. "The economics of art: price determinants and returns on investment in Indian paintings," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 50(6), pages 839-859, January.

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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