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Is there a Bubble in the Art Market?

Author

Listed:
  • Roman Kräussl

    ()

  • Thorsten Lehnert
  • Nicolas Martelin

    (LSF)

Abstract

The record-breaking prices observed in the art market for the last three years have rais the question of whether we are experiencing a speculative bubble. Given the difficulty to determine the fundamental value of artworks, we apply a right-tailed unit root test with forward recursive regressions (SADF test) to detect explosive behaviors directly in the time series of four different art market segments (“Impressionist and Modern”, “Post-war and Contemporary”, “American”, and “Latin American”) for the period from 1970 to 2013. We identify two historical speculative bubbles and find an explosive movement in today’s “Post-war and Contemporary” and “American” fine art market segments.

Suggested Citation

  • Roman Kräussl & Thorsten Lehnert & Nicolas Martelin, 2014. "Is there a Bubble in the Art Market?," LSF Research Working Paper Series 14-07, Luxembourg School of Finance, University of Luxembourg.
  • Handle: RePEc:crf:wpaper:14-07
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    Cited by:

    1. Penasse, J.N.G. & Renneboog, L.D.R., 2014. "Bubbles and Trading Frenzies : Evidence from the Art Market," Other publications TiSEM bf0d8984-df7f-4f02-afc7-3, Tilburg University, School of Economics and Management.
    2. Pedersen, Thomas Quistgaard & Schütte, Erik Christian Montes, 2020. "Testing for explosive bubbles in the presence of autocorrelated innovations," Journal of Empirical Finance, Elsevier, vol. 58(C), pages 207-225.
    3. Spaenjers, Christophe & Goetzmann, William N. & Mamonova, Elena, 2015. "The economics of aesthetics and record prices for art since 1701," Explorations in Economic History, Elsevier, vol. 57(C), pages 79-94.
    4. Xin Li & Chi-Wei Su & Meng Qin & Fahai Zhao, 2020. "Testing for Bubbles in the Chinese Art Market," SAGE Open, , vol. 10(1), pages 21582440199, January.
    5. Toan Ho Manh & Thu Trang Vuong & Manh Tung Ho & Hong Kong Nguyen-To & Quan-Hoang Vuong, 2018. "The painting can be fake, but not the feeling’: an overview of the Vietnamese market through the lens of fake, forgery and copy paintings," Working Papers CEB 18-022, ULB -- Universite Libre de Bruxelles.
    6. Christos Floros & Georgios Galyfianakis, 2020. "Bubbles in Crude Oil and Commodity Energy Index: New Evidence," Energies, MDPI, Open Access Journal, vol. 13(24), pages 1-11, December.
    7. Francesco Angelini & Massimiliano Castellani, 2019. "Cultural and economic value: a critical review," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 43(2), pages 173-188, June.
    8. Goodness C. Aye & Tsangyao Chang & Wen-Yi Chen & Rangan Gupta & Mark Wohar, 2016. "Testing the Efficiency of the Art Market using Quantile-Based Unit Root Tests with Sharp and Smooth Breaks," Working Papers 201625, University of Pretoria, Department of Economics.
    9. Kruse, Robinson & Kaufmann, Hendrik & Wegener, Christoph, 2018. "Bias-corrected estimation for speculative bubbles in stock prices," Economic Modelling, Elsevier, vol. 73(C), pages 354-364.
    10. Demir, Ender & Gozgor, Giray & Sari, Emre, 2018. "Dynamics of the Turkish paintings market: A comprehensive empirical study," Emerging Markets Review, Elsevier, vol. 36(C), pages 180-194.
    11. Kräussl, Roman & Mirgorodskaya, Elizaveta, 2016. "The winner's curse on art markets," CFS Working Paper Series 564, Center for Financial Studies (CFS).
    12. Tolhurst, Tor N., 2018. "A Model-Free Bubble Detection Method: Application to the World Market for Superstar Wines," 2018 Annual Meeting, August 5-7, Washington, D.C. 274387, Agricultural and Applied Economics Association.
    13. Assaf, Ata, 2018. "Testing for bubbles in the art markets: An empirical investigation," Economic Modelling, Elsevier, vol. 68(C), pages 340-355.

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    More about this item

    Keywords

    Art market; Alternative investments; Speculative bubbles; Explosive behavior;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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