Do U.S. Paintings Follow the CAPM? Findings Disaggregated by Subject, Artist, and Value of the Work
This paper investigates to what extent paintings by U.S. artists born before WWII can be treated like capital assets, and whether the findings are specific to artist, subject matter, and value of the work. The capital asset pricing model (CAPM) in its standard static form is applied to painting returns from 1971 to 1996. Price indices and returns for various groupings of paintings derived from large sample hedonic regressions are used to test alternative forms of the standard CAPM. In the first stage time series estimation, betas for various data groupings are computed to test the degree to which the CAPM explains returns. In general the CAPM signals no factors other than market risk which might explain painting returns. Betas generaly are found to be below one with high priced works having betas close to zero and sometimes negative. U. S. paintings appear to have little systematic risk, and thus may provide useful diversification. In a second stage test of the CAPM the computed betas are treated as a long run characteristic accounting for excess returns of the asset. In this cross sectional re-estimation, little support is found for the consistency of the CAPM although high priced paintings show some support. U. S. paintings appear to follow the CAPM to a degree similar to that of traditional capital assets, and thus behave like capital assets regardless of investment desirability. For high value works the CAPM conformity is strongest and diversification value the highest.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (302) 831-2565
Fax: (302) 831-6968
Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Campbell, John Y, 1993.
"Intertemporal Asset Pricing without Consumption Data,"
American Economic Review,
American Economic Association, vol. 83(3), pages 487-512, June.
- John Y. Campbell, 1992. "Intertemporal Asset Pricing Without Consumption Data," NBER Working Papers 3989, National Bureau of Economic Research, Inc.
- Campbell, John, 1993. "Intertemporal Asset Pricing Without Consumption Data," Scholarly Articles 3221491, Harvard University Department of Economics.
- Pesando, James E, 1993. "Art as an Investment: The Market for Modern Prints," American Economic Review, American Economic Association, vol. 83(5), pages 1075-89, December.
- Chanel, O. & Gérard-Varet, L.-A. & Ginsburgh, V., .
"The relevance of hedonic price indices,"
CORE Discussion Papers RP
-1222, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Orley Ashenfelter & Kathryn Graddy, 2003.
"Auctions and the Price of Art,"
Journal of Economic Literature,
American Economic Association, vol. 41(3), pages 763-787, September.
- Sebastian Edwards, 2004. "The Economics of Latin American Art: Creativity Patterns and Rates of Return," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
- Chanel, O. & Gerard, L.A. & Ginsburgh, V., 1992.
"The Relevence of Hedonic Price Indices the Case of Paintings,"
92a19, Universite Aix-Marseille III.
- Olivier Chanel & Louis-André Gérard-Varlet & Victor Ginsburgh, 1996. "The relevance of hedonic price indices: the case of paintings," ULB Institutional Repository 2013/1715, ULB -- Universite Libre de Bruxelles.
- 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 1370-76, December.
- Jianping Mei & Michael Moses, 2002. "Art as an Investment and the Underperformance of Masterpieces," American Economic Review, American Economic Association, vol. 92(5), pages 1656-1668, December.
- Levy, Haim, 1978. "Equilibrium in an Imperfect Market: A Constraint on the Number of Securities in the Portfolio," American Economic Review, American Economic Association, vol. 68(4), pages 643-58, September.
- Douglas Hodgson & Keith Vorkink, 2004. "Asset pricing theory and the valuation of Canadian paintings," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 629-655, August.
- Richard J. Agnello, 2002. "Investment Returns and Risk for Art: Evidence from Auctions of American Paintings," Eastern Economic Journal, Eastern Economic Association, vol. 28(4), pages 443-463, Fall.
- Richard Agnello & Renée Pierce, 1996. "Financial returns, price determinants, and genre effects in American art investment," Journal of Cultural Economics, Springer, vol. 20(4), pages 359-383, December.
- Hui Guo, 2004. "A rational pricing explanation for the failure of CAPM," Review, Federal Reserve Bank of St. Louis, issue May, pages 23-34.
- Sebastian Edwards, 2004. "The Economics of Latin American Art: Creativity Patterns and Rates of Return," NBER Working Papers 10302, National Bureau of Economic Research, Inc.
- Benjamin J. Burton & Joyce P. Jacobsen, 1999. "Measuring Returns on Investments in Collectibles," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 193-212, Fall.
- Anderson, Robert C, 1974. "Paintings as an Investment," Economic Inquiry, Western Economic Association International, vol. 12(1), pages 13-26, March.
- Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
- Baumol, William J, 1986. "Unnatural Value: Or Art Investment as Floating Crap Game," American Economic Review, American Economic Association, vol. 76(2), pages 10-14, May.
When requesting a correction, please mention this item's handle: RePEc:dlw:wpaper:06-02. 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: (Saul Hoffman)
If references are entirely missing, you can add them using this form.