A Century of Art Dealing in New York

We study art trade in New York between 1870 and 1970, analyzing returns on investment by the renowned Knoedler gallery to shed light on the evolution of the American art market. A generalist art gallery should allocate investments to equalize their expected returns, with differences in effective returns depending on purchase prices, number of traded works per artists, search costs and shocks. We confirm these principles and find that the returns were higher in booms, after the death of artists or solo exhibitions at the gallery, and lower for artworks in stock for a longer time. A main interest in the story of the leading gallery of New York is in its intertwining with the history of American art over a century. We find that the returns on European old masters follow an inverse-U shape with a peak during WWI and a subsequent decline, while the returns on American modern artists keep increasing for the entire century: this is consistent with a shift in demand toward American art that was instrumental to promote the development of the New York school.