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When a Master Dies : Speculation and Asset Float

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  • Penasse, Julien
  • Renneboog, Luc

    (Tilburg University, School of Economics and Management)

  • Scheinkman, Jose

Abstract

The death of an artist constitutes a negative supply shock to his future production; in finance terms, this supply shock reduces the artist's float. Intuition may thus suggest that this supply shock reduces the future auction volume of the artist. However, if collectors have fluctuating heterogeneous beliefs, since they cannot sell short, prices overweigh optimists' beliefs and have a speculative component. If collectors have limited capacity to bear risk, an increase in float may decrease subsequent turnover and prices (Hong et al. 2006). Symmetrically, a negative supply shock leads to an augmentation of prices and turnover. We find strong support for this prediction in the data on art auctions that we examine.
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  • Penasse, Julien & Renneboog, Luc & Scheinkman, Jose, 2020. "When a Master Dies : Speculation and Asset Float," Other publications TiSEM 33ff63e3-8842-44c7-92f5-6, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:33ff63e3-8842-44c7-92f5-6cb3e93370c0
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    References listed on IDEAS

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    Cited by:

    1. Li, Yuexin & Ma, X. & Renneboog, Luc, 2021. "In Art We Trust," Discussion Paper 2021-016, Tilburg University, Center for Economic Research.
    2. Heinrich Ursprung & Katarina Zigova, 2021. "The Ultimate Coasian Commitment: Estimating and Explaining Artist-Specific Death Effects," Working Papers CEB 21-013, ULB -- Universite Libre de Bruxelles.
    3. William N Goetzmann & Christophe Spaenjers & Stijn Van Nieuwerburgh, 2021. "Real and Private-Value Assets [Gendered prices]," The Review of Financial Studies, Society for Financial Studies, vol. 34(8), pages 3497-3526.
    4. Ma, Marshall Xiaoyin & Noussair, Charles N. & Renneboog, Luc, 2022. "Colors, Emotions, and the Auction Value of Paintings," European Economic Review, Elsevier, vol. 142(C).
    5. Prieto-Rodriguez, Juan & Vecco, Marilena, 2021. "Reading between the lines in the art market: Lack of transparency and price heterogeneity as an indicator of multiple equilibria," Economic Modelling, Elsevier, vol. 102(C).
    6. Kathryn Graddy & Lara Loewenstein & Jianping Mei & Mike Moses & Rachel A. J. Pownall, 2023. "Empirical evidence of anchoring and loss aversion from art auctions," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 47(2), pages 279-301, June.
    7. Etro, Federico & Stepanova, Elena, 2021. "Art return rates from old master paintings to contemporary art," Journal of Economic Behavior & Organization, Elsevier, vol. 181(C), pages 94-116.

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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G4 - Financial Economics - - Behavioral Finance
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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