Monday, 30 March 2009

Myriad dilettante art aficionados

Forthcoming in the American Economic Review: 'Art as an investment and conspicuous consumption good', by Benjamin Mandel. A great paper with an even better last paragraph: "Finally, this paper provides food for thought for the myriad dilettante art aficionados. In a boast, a friend once told me that his art was a better investment than all other assets, including financial securities and real estate. Accounting for his utility in telling me so, that is indeed likely."


There are a few collectors, perhaps, who collect from a sheer love of the beautiful, but the majority undoubtedly now regard the money expended on their collections as so much invested capital.

[W. G. Menzies, 1935, 'Collecting as an Investment']

Monday, 23 March 2009

Tuesday, 17 March 2009

Monday, 16 March 2009


"Talita Teves is mede-directeur van Amsterdam Auctioneers, de nummer 3 van de Nederlandse kunstveilingmarkt. Ondanks de slechte economische verwachtingen en saneringen bij de Amsterdamse vestiging van Sotheby's verwacht Teves een goed jaar."

Thursday, 5 March 2009

Caveat venditor

The Economist reports on the Yves Saint Laurent sale.

Buying Beauty

This paper investigates the evolution of prices and returns in the art market since the middle of the previous century. We first compile a comprehensive list of more than 10,000 artists and then build a dataset that contains information on more than 1.1 million auction sales of paintings, prints, and works on paper. We perform an extensive hedonic regression analysis that includes unique price-determining variables capturing amongst others: the artist’s reputation, the strength of the attribution to an artist, and the subject matter of the work. Based on the resulting price index, we conclude that art has appreciated in value by a moderate 4.03% per year, in real USD terms, between 1951 and 2007. During the art market boom period 2002-2007, prices augmented by 11.60% annually, which explains the increased attention to ‘art as an investment’. Furthermore, our results show that, over the last quarter of a century, prices of oil paintings and of post-war art have risen faster than the overall market. In contrast to earlier studies, we find evidence of a positive masterpiece effect: high-quality art makes a better investment. Our results are robust to alternative model specifications, and do not seem influenced by sample selection or survivorship biases. When comparing the long-term returns on art to those on financial assets, we find that art has underperformed stocks but outperformed bonds. However, between 1982 and 2007, bonds yielded higher average returns (at a lower risk) than art. Buyers of art should thus expect to reap non-pecuniary benefits rather than high financial returns, especially because the modest art returns are further diminished by substantial transaction costs.

Read more on prices and returns in the art market