Financial returns,price determinants,and genre effects in American art investment

Past studies on art investment generally have found that returns are low and risk is high. In this study we find that the return to art investment is more in line with traditional investments and thus the cost for consumption associated with art seems fairly small. Employing a large sample of paintings by 66 American artists sold at auction between 1971–1992, average returns are found to be over 9 per cent and 3 per cent in nominal and real terms, respectively. The model employs a log linear price regression estimated by pooled cross section and time series data, and allows rates of return as well as hedonic values for various painting and auction attributes to be estimated. These include size, media, age of execution, authenticity of the work, and auction month and house. In addition, rates of return are differentiated by artist, time period of investment, price range and genre of the painting. The findings indicate significant sensitivity of rates of return to these data stratifications.This paper was presented at the 9th international conference of the Association for Cultural Economics, held in Boston, May 8–11, 1996.     

A Price Index for Art Market Auctions

This paper proposes a price index for modern andcontemporary paintings based on estimates and auctionprices. We use this index for the evaluation of theItalian art market and for comparisons with returns onother assets. During the period 1983–1994 art pricesincreased in line with inflation but returns onpaintings were lower than returns on financial assets.In the long run art prices are unrelated to financialassets prices, but a positive correlation with realestate prices emerges.     

Reflections on historical series of art prices: Reitlinger's data revisited

This note of research argues that Reitlinger's series, and all other series such as Meyer's which are based on official auction sales reports, suffer from significant distortions. This distortion is caused by two main factors: a) the absence of data relating to the identity and the profession of the market agents involved in the transactions recorded in time series; b) the criteria of selection adopted to construct the historical series of prices.     

Investment in Paintings: A Short-Run Price Index

This paper analyses the performance of a speculative investment in paintings during the period 1987–1995 by applying a modified repeat sales technique to a sample of 1446 repeat sales. Since this period is characterised by a boom and a non-boom sub-period, a price risk term is introduced to estimate influences that only affect a painting's value upon its sale, by isolating shocks that can cause realised returns to stray from expectations. The main finding is that from 1987 to 1991 an investment in paintigs performs well if compared with alternative forms of investment, such as U.S. stocks, U.S. 30 year government bonds and gold; by contrast, from 1992 to 1995 returns are lower, with the exception of 1993.     

Long- and Short-Term Portfolio Choices of Paintings

In their paper on price comovements of paintings, Ginsburgh and Jeanfils show that in three important markets (London, Paris and New York), prices of well-known and lesser known painters 'move together' (are cointegrated). They conclude that therefore, an investor may be indifferent between the two groups of painters. We show that this is not the case, since well-known painters are less risky, and that though returns may be comparable, the share of well-known painters in a portfolio of paintings might be as high as 90%. We also construct long-run and short-run portfolios and show that these may be very different. These short-term portfolios give interesting insights which help in characterizing each of the three markets.     

Two games in town: a comparison of dealer and auction prices in contemporary visual arts markets

The article tests a couple of hypotheses relating to markets where demand is not taken as a given, but subject to sophisticated and encompassing price-building strategies. The study uses a data set that provides quoted dealer prices for medium-sized works of 100 leading visual artists from 1970 to 2004. These data are compared with auction price results for works by the same artists. The study reports significant discrepancies with respect to the relationship between the age of artists and prices paid for their works in the two markets, and with respect to general price developments in the two markets as measured by indices.

The Careers of Modern Artists

Using transactions from fine art auctionsfor 42 leading American contemporary artists Iestimate the relationship between the value of apainting and the artist's age at the date of itsexecution. The econometric estimates show that artistsborn before 1920 were likely to have produced theirmost valuable work late in their careers, whereasartists born in the 1920s and '30s were more likely tohave done their most valuable work at an early age.Comparison of these results to evidence drawn from arthistory textbooks and retrospective exhibitionsfurthermore indicates that these artists' mostvaluable work has also been that most highly regardedby scholars. I argue that the shift across generationsin the shape of these artists' age-price profiles wasa result of the evolution of modern painting and agrowth in the demand for contemporary American artduring the 1950s and '60s.     

Assessing Quality in Cultural Goods: The Hedonic Value of Originality in Rembrandt's Prints

The definition of quality, and its consistent assessment, is a fundamental issue when dealing with collectibles. We analyze how originality is priced by the market. The market for prints by Rembrandt is considered. An original database has been built including almost 5,000 transactions in the international auction market during the period 1985–1998. The data allow us to control for many different characteristics (market, aesthetic, originality, authenticity, rarity, art history, techniques, conservation, etc.). The concept of “state” is used to measure originality. In printmaking a state is defined as the artist's creative phase, which occurs on the plate before inking and printing. We test whether (non-original) posthumous states are sold at prices lower than Rembrandt's own (original) states. The implicit price associated with the state has been found to significantly decrease if the state was later printed by someone else when it was no longer the master's intervention on the plate. Furthermore, a decreasing value among subsequent original states has proved to positively account for Rembrandt's direct invention. JEL classification: Z11, D46, C52     

The Demand for Books Estimated by Means of Consumer Survey Data

In this analysis we present some results for book demand (schoolbooks are excluded) in Norway, obtained by means of a three-goods model (books, other cultural goods and non-cultural goods) and survey data for more than 18000 households from the period 1986–1999. Various methods of estimation are used, and they provide, surprisingly unambiguous results. Our hypotheses about the price and income sensitivity of book demand are confirmed. Books turn out to be “luxury” goods. Our calculations do also suggest that they are quite price sensitive and that they are close substitutes to other cultural goods. The results for socio-demographic variables indicate that access to outlets for books, sex and age matter for book demand. Moreover, we find that single persons and households with small children, especially those with children less than 7 years, are frequent book-buyers.     

The Impact of the National Endowment for the Arts in the United States: Institutional and Sectoral Effects on Private Funding

This paper examines the impact of the National Endowment for the Arts on private donations to the arts. The aim of the analysis is to assess whether public funding generates a crowding effect on private giving. We distinguish between institutional and sectoral crowding phenomena and discuss their possible implications.We used both a qualitative approach and an econometric model to estimate the effect of NEA introduction and appropriations on donations. Our results suggest that at the institutional level NEA grants do not generally induce donations to recipients while at the sectoral level appropriations and private giving are independent. The introduction of the agency appears to have caused a decrease in donations.     

The impact of film reviews on the box office performance of art house versus mainstream motion pictures

Critics and their reviews can play an important role in consumer decision making in general, and film choice in particular. In this study, we propose that consumers of art house movies are being led by film reviews when making a film choice (influence effect), whereas consumers of mainstream movies are hypothesized to rely mainly on other sources of information. Thus, in the latter case the review does not influence the moviegoer, but may still be a reflection of the ultimate success of the movie (predictor effect). Using the Dutch film industry as our empirical setting, we study the effects of reviews on the opening weekend and on the cumulative box office revenue. Our research shows that the number and size of film reviews in Dutch newspapers directly influence the behavior of the art-movie-going public in their film choice. The number and size of film reviews of mainstream movies, on the other hand, only predict movie performance.

The economic contribution of volunteerism toward the value of our cultural inventory

Scholars for centuries have been investigating and debating what determines the value of a good or service. However, the market has chosen to ignore what has been categorized as nonmarket transactions such as volunteerism. This paper will examine the economic contribution of volunteerism and its impact on our cultural inventory. Economic literature reveals three possible alternative methods to calculating the dollar figure for non-compensated volunteerism. They are Opportunity Cost Approach, Value-Added Approach, and Market Price Equivalency Model. Has cultural volunteerism contributed to cultural inventory by providing an expansion of our knowledge of the past and understanding the future?     

The multiple worlds of equity analysts: valuation,volume, and volatility

This paper contributes to the increasing research on how experts within financial institutions co-produce and organize financial markets, and in particular how equity analysts enact stock markets characterized by high volume and volatility. The 20 equity analysts studied give qualitatively different accounts of what, from an outsider's perspective, appear to be very similar work. The analysts understand investment objects, equity markets, and what constitutes good analytical work in qualitatively different ways. This heterogeneity, or multiplicity, could be one source of the, unexplained by orthodox financial theory, ‘excess’ volatility and ‘excess’ trading volume on financial markets. Therefore, the paper complements accounts within heterodox finance theory and sociology-based studies of financial market activities.     

The Impact of Museum Purchase on the Auction Prices of Paintings

This study examines how art museumspurchasing policy influences the auction prices ofpaintings. Using a cross section of non-speculativetransactions during the period 1820–1970, we findconsiderable empirical support for the hypothesisthat public museums outside the U.S. pay above averageprices in auction markets providing higher thanaverage yields to private sellers. The typical U.S.private museums appear to be more restricted byfinancial constraints and the development of thegeneral economic conditions than their publiccounterparts.