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The purpose of this paper is to present the progress and trends of the literature on art as an investment and to outline potential research lines to be developed.
Abstract
Objective
The purpose of this paper is to present the progress and trends of the literature on art as an investment and to outline potential research lines to be developed.
Design/methodology/approach
This work gathers, analyses and critically discusses the attributes of investments in art in general, and in Latin American art in particular.
Findings
Most studies report that art (art in general, and Latin American in particular) has offered relatively low but positive real returns, which have tended to be below those offered by stocks and similar to those realized by bonds. Art has a low correlation with other investments.
Research limitations and implications
The literature on the attributes of Latin American art as an investment is limited and new research would help to close the knowledge gap with respect to this segment of the art market as it continues to grow.
Practical implications
Similarly to the research carried out into other segments of the art market, studies on Latin American art suggest that the works of art are worth more, ceteris paribus: the more renowned the artist, the larger the work, whether they were executed in oil, and if they were auctioned at Sotheby’s or Christie’s. The paper also details a series of practical implications for those who participate in the art market.
Originality/value
To the best of the authors’ knowledge, this is the first exhaustive review of the literature on the attributes of Latin American art as an investment. The findings of this study are useful for academics, art collectors, auction houses, gallerists and others who take part in the arts market.
Propósito
Presentar los avances y las tendencias de la literatura sobre el arte como inversión, y delinear líneas de investigación a ser desarrolladas.
Diseño/metodología/enfoque
Este trabajo reúne, analiza y discute críticamente los atributos de inversión del arte, en general, y latinoamericano, en particular.
Hallazgos
La mayoría de los estudios reportan que el arte (tanto el arte, en general, como el arte latinoamericano, en particular) ha ofrecido rendimientos reales positivos, aunque relativamente bajos, los cuales tienden a ser inferiores de los de las acciones y a ser similares a los de los bonos. El arte tiene una baja correlación con otras inversiones.
Limitaciones e implicaciones de la investigación
La literatura sobre los atributos del arte latinoamericano como inversión es limitada. Es de esperar que nuevas investigaciones permitan ir cerrando la brecha del conocimiento con respecto a esta parte del mercado del arte a la par que éste continúe creciendo.
Implicaciones prácticas
Los estudios de arte latinoamericano sugieren, similar a las investigaciones sobre otros segmentos del mercado del arte, que las obras de arte valen más, ceteris paribus: cuando el artista es más reputado, a medida que el área de las obras es mayor, si han sido ejecutadas en óleo, y cuando son subastadas en las casas de subastas Sotheby’s o Christie’s. En el trabajo se detallan, además, una serie de implicaciones prácticas para los participantes del mercado de arte.
Originalidad/valor
Hasta donde se ha podido comprobar, esta es la primera revisión exhaustiva acerca de los atributos del arte latinoamericano como inversión. Los resultados de esta investigación son de utilidad para: académicos, coleccionistas de arte, casas de subastas, galeristas, y demás participantes en el mercado del arte.
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The process of commercialization of art is often referred to as “monetization,” denoting the use of art as an investment class. I discuss the reverse mechanism, defined as…
Abstract
The process of commercialization of art is often referred to as “monetization,” denoting the use of art as an investment class. I discuss the reverse mechanism, defined as “Monet-ization,” where investment is overlaid with artistic value, and unproven art is imbued with aesthetic qualities. This mechanism is derived from a historical overview of key periods in the history of art, such as the flourishing of new genres in early 17th century Dutch art and the rise of Modern art in the early 20th century. An analysis of original data on the leading art collectors in the world in the period 1990–2015 highlights the tendency for collectors with an “investor” profile and eclectic taste to buy contemporary art. Combining artworks from diverse periods and styles, eclectic personal collections contribute to the conversion of economic into aesthetic value by way of spill-overs across genres and to the attribution by association of “old” value to “new” art. The “Monet-ization” process helps elucidate how paradigm shifts occur in the art world and how innovation survives under conditions of insufficient demand.
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Urbi Garay, Gwendoline Vielma and Edward Villalobos
The purpose of this paper is to present the formulation of the first exhaustive price index for Argentinian (and other Latin American countries) visual artists using 5,069 works…
Abstract
Purpose
The purpose of this paper is to present the formulation of the first exhaustive price index for Argentinian (and other Latin American countries) visual artists using 5,069 works sold in auctions by 71 Argentinian artists during the years 1980-2014.
Design/methodology/approach
The authors estimated a regression of hedonic prices using the ordinary least squares method. When the regression was run and the results were analysed, the authors then estimated the annual price index of Argentinian artists’ work to then compare them with different financial and economic variables.
Findings
The average annual nominal arithmetic rate of return in dollars for Argentinian art during this period was 6.81 per cent, with a 29.11 per cent standard deviation. Argentinian art shows a low correlation with Argentinian and US companies’ shares and a slightly negative correlation with US bonds. This is the reason for artworks to be included in investors’ portfolios despite the relatively high volatility.
Research limitations/implications
Valuating works of art in Argentina can be explained by a series of their attributes. The benefits of art as an investment should be contrasted with factors including illiquidity and high transaction costs that are inherent when investing in works of art.
Practical implications
Argentinian artists’ works have higher prices when, ceteris paribus, they are dated; they are auctioned in either Christie’s, Sotheby’s, Galería Arroyo, Roldan & Cia, Meeting Art, or Naon & Cia; they are oil or acrylic paintings; they are larger in size – although the price increase is decreasing when the size of the painting increases; and when the artist dies before their work is auctioned.
Originality/value
This work presents the first rigorous price index of Argentinian artists’ works. Additionally, and as far as the authors have been able to observe, the time-period in this article is the longest that has been used in studies on art as an investment in emerging markets.
Propósito
Este trabajo presenta la elaboración del primer índice exhaustivo de precios de artistas plásticos de Argentina (y de cualquier otro país de Latino América) a partir de 5.069 ventas de obras de 71 artistas argentinos realizadas en subastas durante el período 1980-2014.
Diseño/metodología/enfoque
Se estimó una regresión de precios hedónica por el Método de Mínimos Cuadrados Ordinarios. Una vez corrida la regresión y analizados sus resultados, se procedió a estimar el índice anual de precios de obras de artistas argentinos, para posteriormente relacionarlos con diversas variables financieras y económicas.
Hallazgos
El rendimiento promedio aritmético nominal anual en dólares del arte argentino durante ese período fue de 6,81% con una desviación estándar de 29,11%. El arte argentino exhibe una baja correlación con las acciones de empresas argentinas y de EEUU y ligeramente negativa con bonos de EEUU, lo cual le confiere atributos para ser incluido en las carteras de los inversionistas, a pesar de la elevada volatilidad.
Limitaciones e implicaciones de la investigación
Se consigue que la valoración de arte en Argentina puede ser explicada por una serie de atributos de las obras de arte. Los beneficios del arte como inversión deben ser evaluados con la iliquidez y los elevados costos de transacción, entre otros costos, inherentes a la inversión en obras de arte.
Implicaciones prácticas
Las obras de artistas argentinos tienen precios más altos cuando, ceteris paribus: están fechadas, se subastan en Christie's, en Sotheby's o en Galería Arroyo, son ejecutadas en óleo o en acrílico, tienen un mayor área, aunque el aumento de precio es decreciente al aumentar el área, y cuando el artista ya había fallecido al momento de celebrase la subasta.
Originalidad/valor
Este trabajo propone el primer índice riguroso de precios de obras de artistas de Argentina. Además, y hasta donde hemos podido comprobar, el período utilizado en este trabajo es el más largo que se haya empleado en estudios del arte como inversión en mercados emergentes.
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The “hostile worlds” view argues that money corrupts the meaning of art, but some suggest this is a dated concept in describing the art market. Instead of dismissing this view…
Abstract
The “hostile worlds” view argues that money corrupts the meaning of art, but some suggest this is a dated concept in describing the art market. Instead of dismissing this view, this chapter argues that we need a typology of beliefs about art, money, and commensuration; what could be understood as a pluralist understanding. Based on ethnographic research on the high-end contemporary art market in New York and London, I find that collectors, investors, and art world experts often have different views about the relationship between art and money. This recognition is significant because art is a symbolic good with assigned, rather than intrinsic value, meaning that the value of art can be damaged for people holding hostile worlds views when the mechanisms that maintain the appropriate balance between art and money break down or are disregarded. In this sense, hostile worlds views create a performativity effect.
The purpose of this paper is to discuss the role and type of records required to support the financial value of artworks and the importance of records for accountability. It looks…
Abstract
Purpose
The purpose of this paper is to discuss the role and type of records required to support the financial value of artworks and the importance of records for accountability. It looks at the impact of records of provenance, authenticity and investment value and it identifies the impact of the presence, absence and quality of supporting records on the value of an artwork.
Design/methodology/approach
Assessing records and their impact on the value of artworks involves investigating whether an artwork without records of authenticity, provenance and investment has the same value as one with such records. It also involves examining how records that provide evidence of an artwork's financial value (prices, auctions, transactions, condition reports, etc.) affect the value of the artwork. What is the impact of records on the value of an artwork? Research was conducted starting with a review of the literature and a small survey of experts.
Findings
The results suggest that art records are increasingly important with regard to ownership disputes, insurance claims, accountability for public spending, risk reduction and investment value. Records of provenance, investment and authenticity clearly support the value of artworks, yet the research highlighted a lack of awareness amongst experts about the importance of authenticity. Higher standards, record‐keeping, regular reviews of the artwork and the market and continuous improvements are required to maintain accountability and the value of a collection. Recommendations include regular updates of records, the keeping of records on rights, proof of ownership and long‐term retention.
Practical implications
Further research would be required to clarify whether comparison methods are adequate for the price formation of artworks, to ascertain which records would be required and to establish recognised standards for the content of records. The findings raised awareness of the need for information on the creation of artworks.
Originality/value
The paper concludes by emphasising that it is essential to obtain records for a collection and to keep them secure and updated. It proposes that good record‐keeping reduces risks, improves transparency, supports the value attained and increases in importance as the financial value of art climbs. Many sources and types of record are necessary to support the value of an artwork, especially records of provenance, investment value and authenticity. An artwork with quality records in these categories has higher financial value.
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Michael Tucker, Walter Hlawischka and Jeff Pierne
The role of art in a portfolio of investments is examined using Sotheby's art index as & proxy for returns on art investments. Historical data for portfolios of artwork and other…
Abstract
The role of art in a portfolio of investments is examined using Sotheby's art index as & proxy for returns on art investments. Historical data for portfolios of artwork and other financial securities over the period 1981 to 1990 are used to construct the optimal mean‐variance portfolio. The art investment receives over 36% of this portfolio. This large percentage can be traced in part to the low correlation of art returns to the returns of other financial securities. Clearly investments in art deserve the serious consideration of mean‐variance investors
Shailendra Gurjar and Usha Ananthakumar
The valuation of artworks is challenging since their value encompasses economic, social and cultural values. This study examines two specific questions about the economics of…
Abstract
Purpose
The valuation of artworks is challenging since their value encompasses economic, social and cultural values. This study examines two specific questions about the economics of Indian art market: first, the determinants of the price of paintings by Indian artists and second, the risk and return characteristics of investment in Indian paintings. The authors also analyze the role of local context for both questions.
Design/methodology/approach
This study uses 8,865 paintings that are auctioned between January, 2000 and June, 2018. A generalized additive model (GAM) is employed to identify the determinants of auction prices and estimate art market price index.
Findings
The results indicate that the price of paintings in the Indian market is impacted by both global and local factors. Consistent with the previous research, this study finds that provenance, literature, living status of an artist, artist reputation, auction house, location and gender determine prices. However, the unique behavior of artwork medium and art movement affiliation in the Indian art market signifies the importance of local context in the valuation of artworks. An analysis of the second aspect of the study, i.e. risk and return characteristics of art investment, suggests that though overall art market returns are not lucrative, there are sub-sections in the market that outperform stocks and other assets. Further, the Indian art market shows a weak or negative correlation with other assets, thus making it a good candidate for a diversified portfolio. One of the important findings of this study is that artworks created by artists associated with the Bombay Progressive Artists' Group (PAG) command a significant price premium over all other artworks. Moreover, the average return on investment in paintings by artists affiliated to the Bombay PAG is not only significantly better than other art movements but also higher than all other art assets.
Originality/value
This study contributes to the growing literature on the economics of art market by providing a comprehensive analysis of the economics of Indian paintings. This research highlights the importance of local factors in price determination and on the risk and return characteristics of art investment. To the best of the authors’ knowledge, it is the most comprehensive study of the economics of Indian painting market and the first study to identify the relationship between Indian art movements and prices of paintings and returns on investment in paintings.
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Jennifer Cinefra, Urbi Garay, Claudia Mibelli and Eduardo Pérez
Relatively little is known about the determinants of the prices of paintings. The purpose of this paper is to analyse the price determinants of the art of Joan Miró, one of the…
Abstract
Purpose
Relatively little is known about the determinants of the prices of paintings. The purpose of this paper is to analyse the price determinants of the art of Joan Miró, one of the great masters of Modern Art.
Design/methodology/approach
The authors analysed 255 artworks by Miró sold at Sotheby’s and Christie’s between 2003 and 2017, and performed a hedonic price regression to measure the impact of a series of variables on the prices of this artist’s works.
Findings
Miró’s works command higher prices, ceteris paribus, when they were painted on canvas, were sold at Sotheby’s and in New York City or London, were traded during the evening session and depending on the period in which they had been painted, the size of their surface area, the number of words used to describe the respective lot and whether they had appeared in an art book. The prices of Miró’s paintings increased substantially between 2003 and 2008 and then declined, coinciding with the global financial crisis of 2009.
Research limitations/implications
The results were obtained from prices established in art auctions, which represent only one portion of the market.
Originality/value
This is the first exhaustive study carried out on the determinants of the prices of Joan Miró’s works. The artist represents an ideal case due to the large number of his works that have been sold at auctions. As yet, only studies of Pablo Picasso and Andy Warhol have been conducted. Joan Miró has well-defined artistic periods, which also allows us to determine the impact on the price of the works of the period in which it was created. This paper also offers a methodological contribution to parties involved in the art sector (artists, galleries, collectors, investors, museums, etc.).
Objetivo
Se conoce relativamente poco acerca de los determinantes de los precios de las obras de arte de artistas específicos. Este estudio analiza los determinantes de los precios de las pinturas de Joan Miró, uno de los grandes maestros del arte moderno.
Diseño/Metodología/Enfoque
Se analizaron 255 pinturas de Miró que fueron vendidas en Sotheby’s y Christie’s entre 2003 y 2017, y se estimó una regresión hedónica de precios con el objetivo de medir el impacto de una serie de variables en los precios de las obras de este artista.
Hallazgos
Las obras de Miró obtuvieron precios más altos, ceteris paribus, cuando estaban puintadas sobre lienzo, se vendieron en Sotheby’s y en la ciudad de Nueva York o Londres, se subastaron durante la sesión de la noche, y dependiendo del período en que se pintaron, el tamaño de su área, la cantidad de palabras utilizadas para describir el lote respectivo y si habían aparecido en un libro de arte. Los precios de las pinturas de Miró aumentaron sustancialmente entre 2003 y 2008 y luego disminuyeron, coincidiendo con la crisis financiera mundial de 2009.
Limitaciones de la investigación/implicaciones
Los resultados se obtuvieron a partir de los precios establecidos en las subastas de arte, los cuales representan solo una porción del mercado.
Originalidad/valor
Este es el primer estudio exhaustivo realizado sobre los determinantes de los precios de las obras de Joan Miró. El artista representa un caso ideal debido a la gran cantidad de sus obras que se han vendido en subastas. Hasta el momento, solo se han realizado estudios de Pablo Picasso y Andy Warhol. Joan Miró tiene períodos artísticos bien definidos, lo que también permitió determinar el impacto que en el precio de las obras podía tener el período en que éstas se crearon. Este trabajo también ofrece una contribución metodológica a las partes involucradas en el sector del arte (artistas, galerías, coleccionistas, inversores, museos, etc.).
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Mark S. LeClair and Kathy Doornbosch
Corporate involvement in the acquisition and display of fine art has expanded from a relatively unknown practice undertaken by a few businesses, to a common activity involving…
Abstract
Corporate involvement in the acquisition and display of fine art has expanded from a relatively unknown practice undertaken by a few businesses, to a common activity involving hundreds of firms. This study presents the results of a survey of 450 corporations (with 130 respondents) aimed at measuring the motivations behind the creation of corporate collections. Such collections may be held to improve employee morale and retention, to enhance the public image of the corporation, or to bolster the bottom‐line. In addition, a number of non‐monetary reasons are frequently cited. Corporations may be hesitant to reveal their true motives for holding art, since such a revelation may undo the very reasons for acquiring such a collection (enlightenment becomes simple self‐interest). Unlike previous studies of this kind, the questions are designed to determine the motivating factors behind these collections, without relying solely on the firms to reveal those motives. The results indicate that although a variety of motives, both pecuniary and non‐pecuniary, underlie these acquisitions, the former tend to dominate.
Savva Shanaev, Nikita Shimkus, Binam Ghimire and Satish Sharma
The purpose of this paper is to study LEGO sets as a potential alternative asset class. An exhaustive sample of 10,588 sets is used to generate inferences regarding long-term LEGO…
Abstract
Purpose
The purpose of this paper is to study LEGO sets as a potential alternative asset class. An exhaustive sample of 10,588 sets is used to generate inferences regarding long-term LEGO performance, its diversification benefits and return determinants.
Design/methodology/approach
LEGO set performance is studied in terms of equal- and value-weighted portfolios, sorts based on set characteristics and cross-sectional regressions.
Findings
Over 1966–2018, LEGO value-weighted index accounted for survivorship bias enjoys 1.20% inflation-adjusted return per annum, well below 5.54% for equities. However, the defensive properties of LEGO are considerable, as including 5%–25% of LEGO in a diversified portfolio is beneficial for investors with varying levels of risk aversion. LEGO secondary market is relatively internationalised, with investors from larger economies, countries with higher per capita incomes and less income inequality are shown to trade LEGO more actively.
Practical implications
LEGO investors derive non-pecuniary utility that is separable from their risk-return profile. LEGO is not exposed to any of the Fama-French factors, however, set-specific size and value effects are also well-pronounced on the LEGO market, with smaller sets and sets with lower price-to-piece ratio exhibiting higher yields. Older sets are also enjoying higher returns, demonstrating a liquidity effect.
Originality/value
This is the first study to investigate the investment properties of LEGO as an alternative asset class from micro- and macro-financial perspectives that overcomes many survivorship bias limitations prevalent in earlier research. LEGO trading is shown to be an important source of valuable data to enable original robustness checks for prominent theoretical concepts from asset pricing and behavioural finance literature.
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