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Art as an alternative asset class: Risk and return characteristics of the Middle Eastern & Northern African art markets

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  • Kräussl, Roman

Abstract

This chapter analyzes the risk and return characteristics of investments in artists from the Middle East and Northern Africa (MENA) region over the sample period 2000 to 2012. With hedonic regression modeling we create an annual index that is based on 3,544 paintings created by 663 MENA artists. Our empirical results prove that investing in such a hypothetical index provides strong financial returns. While the results show an exponential growth in sales since 2006, the geometric annual return of the MENA art index is a stable13.9 percent over the whole period. We conclude that investing in MENA paintings would have been profitable but also note that we examined the performance of an emerging art market that has only seen an upward trend without any correction, yet.

Suggested Citation

  • Kräussl, Roman, 2014. "Art as an alternative asset class: Risk and return characteristics of the Middle Eastern & Northern African art markets," CFS Working Paper Series 494, Center for Financial Studies (CFS).
  • Handle: RePEc:zbw:cfswop:494
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    References listed on IDEAS

    as
    1. 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.
    2. Anderson, Robert C, 1974. "Paintings as an Investment," Economic Inquiry, Western Economic Association International, vol. 12(1), pages 13-26, March.
    3. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    4. Luc Renneboog & Christophe Spaenjers, 2013. "Buying Beauty: On Prices and Returns in the Art Market," Management Science, INFORMS, vol. 59(1), pages 36-53, February.
    5. repec:adr:anecst:y:1994:i:35:p:06 is not listed on IDEAS
    6. Luc Renneboog & Tom Van Houtte, 2000. "From realism to surrealism: investing in Belgian art," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 165, pages 69-106.
    7. Pesando, James E, 1993. "Art as an Investment: The Market for Modern Prints," American Economic Review, American Economic Association, vol. 83(5), pages 1075-1089, December.
    8. Erdal Atukeren & Aylin Seçkin, 2006. "Art and the Economy: A First Look at the Market for Paintings in Turkey," Economics Bulletin, AccessEcon, vol. 26(3), pages 1-13.
    9. Hayat, Raphie & Kraeussl, Roman, 2011. "Risk and return characteristics of Islamic equity funds," Emerging Markets Review, Elsevier, vol. 12(2), pages 189-203, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Alternative investments; Art price index; Optimal Asset Allocation;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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