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Erfolgsfaktoren bei der Vermarktung von Kunst
Abstract
Der Kunstmarkt weist bei einem jährlichen internationalen Marktvolumen von ca. 43 Mrd. US$ neben dem kulturellen Stellenwert auch interessante ökonomische Implikationen auf, die für die betriebswirtschaftliche Forschung relevant sind. Da ein Gemälde ein Einzelstück ist, das selten gehandelt wird und dessen Wertschätzung sehr subjektiv ist, besteht eine erhebliche Unsicherheit bzgl. des Markt-Preises. Durch die wachsende Bedeutung des Kunstmarktes wurden zunehmend Studien veröffentlicht, die vor allem versuchen, die am Markt erzielten Preise zu erklären. In diesem Aufsatz werden die bisherigen empirischen Forschungsergebnisse aufbereitet. Es werden die zentralen Einflussfaktoren auf die Nachfrage nach Kunstwerken systematisiert und empirische Generalisierungen abgeleitet. Die hier präsentierte Literaturanalyse verdeutlicht entlang einer Analyse der Produkt-, Künstler-, und Handelsfaktoren die zentralen Erfolgsfaktoren von Kunstwerken hinsichtlich des am Markt realisierten Preises für Kunst.
Es ist die Hölle los im Marmorsaal des Berliner Hotels Esplanade, alle sitzen dicht an dicht, manche müssen am Rand gar stehen. Von oben glimmern die goldenen Kronleuchter, vorne die Bühne vor majestätsrotem Wandvorhang. Dort, in der Mitte eines langen Tischs, der Münchner Kunsthändler Hugo Helbing, den einen Arm in die Luft gereckt. Neben ihm wohl sein Geschäftspartner, der Berliner Kunsthändler Walther Feilchenfeldt, ein paar Schriftführer.
Es ist nur eine Momentaufnahme, die Max Slevogt hier mit Die Auktion der Sammlung Huldschinsky festhielt. Aber sie bildet ab, worauf es ankommt: Sie galt lange im Voraus als „Hauptereignis“ der deutschen Kunstwelt jenes Jahres, Rembrandt, Rubens, Ruisdael, alles kam unter den Hammer. Sich das Grand Hotel am Potsdamer Platz als Auktionsort auszusuchen – Charlie Chaplin und Greta Garbo sollen hier logiert haben –, war da nur konsequent: im „stilgerechten Rahmen“3 eben. In einem Setting, das einer pompösen Theaterbühne gleicht.
An zwei kühlen, regnerischen Berliner Frühlingstagen im Mai 1928 also, die nächste Reichstagswahl war eine gute Woche entfernt, ging jene, wie man heute wohl sagen würde, als monumentales Event gehypte Versteigerung der Kunstsammlung von Unternehmer und Philanthrop Oscar Huldschinsky über die Bühne. Und Slevogt malte sie so, dass man einen Eindruck bekommen kann, wie stickig und flirrend die Atmosphäre vor Ort gewesen sein muss. Alle waren sie da, eine „starke Beteiligung ausländischer Museumsleute und Kunsthändler und in Gegenwart eines übermäßig großen sensationslüsternen Publikums“4, hielt Max Friedländer hinterher fest.
Begleitet von einem „höchst monumental[en]“ Auktionskatalog: 400 Seiten stark, 48 auf 35 Zentimeter, heller Halbleineneinband, innen Kupferdrucktafeln.
Die Tatsache, dass dieser Katalog ein Extrembeispiel ist und für ein Spektakel steht, das selbst als Extrembeispiel deutscher Auktionen des 20. Jahrhunderts – vor 1945 – gelten kann, macht ihn zum idealen Beispielfall. Um ausgehend davon zu zeigen, wie das Medium „Auktionskatalog“ und sein narratives Potential taugt für heutige Provenienzforschung.
Im Zentrum der folgenden Arbeit steht also, „Auktionskataloge“ als Gattung umfassender zu begreifen, um ihre Rolle für heutige Provenienzforschung präziser einzuordnen. Provenienzforschung ist naturgemäß eine Wissenschaft, die permanent mit Lücken zu tun hat, versuchen muss, diese zu füllen. Provenienzrecherche versucht, zurückzuverfolgen, wann ein Objekt wie den Besitz gewechselt hat; und unter welchen äußeren politischen, makro-, meso- wie mikrokosmischen gesellschaftlichen, wirtschaftlichen, biographischen Bedingungen. Die These: Auktionskataloge sind Träger all dieser Informationen. Gleichzeitig. Die Dimension dieser umfassenden, einander überlagernden Informationsnetzwerke blieb bislang unterbeleuchtet.
Das Thema Kunst und Kultur – und hier insbesondere der zeitgenössischen Kunst (Contemporary Art) besitzt einen heute sehr hohen Aufmerksamkeitswert. Im Bereich der Kunst- und Kulturwissenschaften sowie der Kunstgeschichte wird das Thema Kunstmarkt allerdings sehr zwiespältig erfasst. So ist in einer Bezugnahme auf Bourdieu, der bereits zwischen symbolischen Werten unterscheidet, eine Behandlung der Segmente des Kunstmarktes zur Abgrenzung von wissenschaftlichen Bereichen (Wuggenig/Rudolph 2013) bzw.
This study investigates the relationship between the value of painting and the fame of the artist. We determine the artist’s fame by the artist’s style and objects which were significantly used in the artist’s paintings. We present a theoretical model to support our analysis. The model is modified from Rosen (1974) to art auctions by using reservation price. A sample of impressionist and modern paintings from famous artists at auctions is analyzed using a hedonic regression model. The results show a significant relationship between style and market valuation as well as objects and market valuation. We also find that medium, provenance, signature, exhibition, literature, number of auctions, where the art was sold, artist’s age when the painting was executed and gift play a significant role in the determination of the price of the painting. By including “Google” variable on the model, we find the effect of popularity on price.
Public sales art catalogues include low and high pre-sale price estimates by experts. This makes it possible to analyze whether pre-sale estimates are unbiased predictors of realized prices. Unbiasedness is tested using a sample of some 1,600 lots of English silver auctioned by Christie's and Sotheby's. Results show that estimates are slightly (but significantly) baised and that experts do not use ail the information that is available to them when they make their estimates.
Purpose
The purpose of this paper is to argue that greater awareness of the connections between the traditions and conventions of visual art and the production and consumption of images leads to enhanced ability to understand branding as a strategic signifying practice.
Design/methodology/approach
Several prominent, successful artists served as case studies to illuminate the potential for insights into the interconnections between art, branding, and consumption by turning to art history and visual studies. Discusses the cross‐fertilization of art and branding, focusing on three contribution areas: the interactions between art, brands and culture, the self‐reflexivity of brands, and brand criticism.
Findings
Successful artists can be thought of as brand managers, actively engaged in developing, nurturing and promoting themselves as recognizable “products” in the competitive cultural sphere.
Originality/value
This paper places brands firmly within culture to look at the complex underpinnings of branding, linking perceptual and cognitive processes to larger social and cultural issues that contribute to how brands work and argues that art‐centred analyses generate novel concepts and theories for marketing research.
We construct returns and quantity indices for Impressionist, Modern and Contemporary painting over the last thirty years, using the results of public auctions. In particular, we isolate the large swing in prices during the late 1980s; from results on individual artists, we also conclude that the randomness in the behaviour of prices is very limited, once the behaviour of the aggregate market in known. /// Nous construisons des indices de rentabilité pour les peintres impressionnistes, modernes et contemporains pour les 30 dernières années; ces calculs sont basés sur les prix réalisés en ventes publiques. Nous isolons en particulier les amples mouvements de prix de la fin des années quatre-vingts. Nous montrons aussi que les prix obtenus par les artistes individuellement sont très corrélés à l'indice général du marché.
Two basic approaches have been used by the literature focusing on the return to holding artistic works: the hedonic price model and the repeat-sales model. This paper provides a procedure for jointly estimating the two models in a way that take advantages of the unique information contained in each. A semiannual price index for Picasso prints is estimated by using a model derived from the basic framework of the hybrid models. The empirical results suggest that the hybrid model provides the most precisely estimated price index by reducing the level of price volatility.
This article develops a sociological analysis of the price mechanism on the market for contemporary art. On the basis of in-depth interviews with art dealers in New York and Amsterdam, I address two pricing norms: one norm inhibits art dealers from decreasing prices; the other induces them to set prices according to size. To account for these pricing norms, I argue that price setting is not just an economic but also a signifying act: despite their impersonal, businesslike connotations, actors on markets manage to express a range of cognitive and cultural meanings through prices. Previously, meanings of prices have been recognized in signaling theories within economics. However, these meanings are restricted to profit opportunities. Within the humanities, by contrast, meanings of prices are restricted to contaminating or corrosive meanings. The sociological perspective I develop claims that prices, price differences, and price changes convey multiple meanings related to the reputation of artists, the social status of dealers, and the quality of the artworks that are traded.
Different art objects are likely to be priced by means of different systems of hedonic characteristics; more precisely, different evaluation procedures for high and low price items are often postulated. However, the empirical evidence on this point is scant. The main purpose of this paper is to fill this gap by using the quantile hedonic regression approach. The empirical evidence, based on a data set of 716 Picasso paintings sold at auction worldwide, highlights the critical role of the price classes in determining the evaluation criteria of art items.
This paper uses a unique data set of Latin American paintings auctioned by Sotheby's between 1995 and 2002 to investigate
several puzzles from the recent auctions literature. Our results suggest that: (i) the reputation of an artist and the provenance
of the artwork, often omitted variables in previous studies, seem to be more important determinants of the sale price of a
painting than more standard factors, such as medium and size, (ii) the opinion of art experts seems to be of limited use in
predicting whether or not an artwork sells at auction, (iii) there is little supporting evidence for the widespread notion
that the best or more expensive artworks tend to generate above average returns (the masterpiece effect), although (iv) there
is strong evidence in our data for the declining price anomaly or afternoon effect (that is, when heterogeneous products sold
sequentially follow a decreasing pattern of prices.)
A series of experiments illustrates a learning process that enhances brand equity at the expense of quality-determining attributes. When the relationship between brand name and product quality is learned prior to the relationship between product attributes and quality, inhibition of the latter may occur. The phenomenon is shown to be robust, but its influence appears sensitive to contextual variations in the learning environment. Tests of process are inconsistent with attentional explanations and popular models of causal reasoning, but they are supportive of associative learning models that portray learners as inherently forward looking. Copyright 2000 by the University of Chicago.
Analysing a panel of paintings by Danish painters suggests that the conditional life expectancy of the artist at the time of sale has a negative impact on the sale price. This is consistent with the idea that artists share some of the characteristics of durable monopolists and that the aging and ultimately the death of the artist represent acceptable forms of commitment not to 'overproduce'. In addition interest in an artist's work begins to wane after their death.
Art is priceless, but paintings, and other objects, have been sold on markets since the time of the Roman Empire. In this paper, we describe a method for constructing a price index for paintings and compare this index to the indices of various financial markets. In particular, we discuss whether the price of art is related to financial markets, whether the art market is weakly efficient, and whether it is more or less risky than financial markets. The Geneva Papers on Risk and Insurance Theory (1994) 19, 7–21. doi:10.1007/BF01112011
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.
This paper analyses the performance of an investment in sculpture during theperiod 1987–1995 by applying the hedonic price technique with time dummyvariables to a sample of over 27,000 sales at auctions. The main finding isthat the adjacent year price index differs substantially between theinexpensive/middle portfolio and the expensive portfolio. The first showsthe existence of a boom period until 1990, followed by a non boom period. Bycontrast, the return of an investment in the expensive portfolio performedsomewhat better during the period analysed, with the only fall in the priceindex in 1990 and 1991. Copyright Kluwer Academic Publishers 2002
We analyse determinants of prices for contemporary art with the help of quantitative data. The focus is on gallery rather than auction prices in the Netherlands. We model the determinants of prices on three different levels: the work of art (size, material), the artist (age, sex, place of residence, institutional recognition), and the gallery (location, institutional affiliation, age). Our main findings are that the size and material of works of art, and the age and place of residence of the artist are strong predictors of price; that differences in size and materials partly ``mask'' price differences between artists; and that the variance in prices across galleries is largely explained by characteristics of the artists they represent. Copyright Kluwer Academic Publishers 2002
This paper examines two groups of Damien Hirst's artwork to determine which appreciates more in value over time. Do unique, Hirst-created works appreciate more because they are one-of-a-kind, or does Hirst's established brand support the prices of the pieces in the repeated series? I find that the laws of supply and demand hold in the market for Hirst's work. Scarcer, unique works exhibit higher rates of return than repeated series works. However, the fact that Hirst's repeated series works' prices still increase despite increases in supply suggests that there is value to producing enough similar work so that a style becomes recognized as iconic of an artist, in other words, a brand.
Artists, auctioneers, art galleries, curators, collectors and authorities all elaborate strategies, the cornestone of which is the complex logic of the art market. Since the value of the works of art is not linked with production costs or income of firms, price fluctuation is very unpredictable (Baumol, 1986). Businessmen generally estimate that the art market could surely provide an average profit but this market is so unstable that it discourages cautious investors. In this sector, rumours play a bigger part than anywhere else. The acts of some key people are considered as signals that give direction to the market and they are then amplified by many “relay-participants”.
Marketing is a field that is rich in data. Our data is of high quality, often at a highly disaggregate level, and there is considerable variation in the key variables for which estimates of effects on outcomes such as sales and profits are desired. The recognition that, in some general sense, marketing variables are set by firms on the basis of information not always observable by the researcher has led to concerns regarding endogeneity and widespread pressure to implement instrumental variables methods in marketing problems. The instruments used in our empirical literature are rarely valid and the IV methods used can have poor sampling properties, including substantial finite sample bias and large sampling errors. Given the problems with IV methods, a convincing argument must be made that there is a first order endogeneity problem and that we have strong and valid instruments before these methods should be used. If strong and valid instruments are not available, then researchers need to look toward supplementing the information available to them. For example, if there are concerns about unobservable advertising or promotional variables, then the researcher is much better off measuring these variables rather than using instruments (such as lagged marketing variables) that are clearly invalid. Ultimately, only randomized variation in marketing variables (with proper implementation and large samples) can be argued to be a valid instrument without further assumptions.
We hypothesize the existence of a slow-moving fad component in art prices. Using unique panel survey data on art market participants’ confidence levels in the outlook for a set of artists, we find that sentiment indeed predicts short-term returns.
This article investigates the extent to which economic markets have incorporated mainstream artistic acceptance of African American art. Prices of oil paintings sold at auction from 1972 to 2004 for African American artists are compared to their contemporaries. Gross means between the two groups reveal averages significantly lower for African American artists throughout the time period. Hedonic regressions, used to refine the statistical analysis by controlling for factors characterizing the painting and auction environment, also reveal that African American artists fetch lower prices. The hedonic regressions, however, reveal a narrowing gap between the two groups since price appreciation has been higher for works by African American artists. The high investment returns have made investment in paintings by African American artists a relatively profitable niche in recent years comparing well with traditional investments such as stocks and bonds. This profitability may continue since painting prices for African Americans have not completely caught up to those of contemporaries.
We propose a new statistical instrument-free method to tackle the endogeneity problem. The proposed method models the joint distribution of the endogenous regressor and the error term in the structural equation of interest (the structural error) using a copula method, and makes inferences on the model parameters by maximizing the likelihood derived from the joint distribution. Similar to the “exclusion restriction” in instrumental variable methods, extant instrument-free methods require the assumption that the unobserved instruments are exogenous, a requirement that is difficult to meet. The proposed method does not require such an assumption. Other benefits of the proposed method are that it allows modeling of discrete endogenous regressors and offers a new solution to the slope endogeneity problem. In addition to linear models, the method is applicable to the popular random coefficient logit model with both aggregate data and individual data. We demonstrate the performance of the proposed method via a series of simulation studies and an empirical example.
Although the market for Canadian paintings is now of substantial magnitude, with several works having recently sold for well over a million dollars, it remains true that with very few exceptions, the works of Canadian painters are bought and sold only in Canada and held only by Canadian collectors. This market can thus be viewed as almost exclusively local, and it is therefore not clear that there should be any linkage between price movements for Canadian art and those for the mainstream global market in old master, impressionist, and modern art. This paper investigates the presence and nature of such time series dependence econometrically, both in terms of long term trends as reflected in the co-integrating relationship between Canadian and the global market, and in terms of short-run co- movements as represented in correlations. The possibility that the local market "follows" the global one is also considered through an analysis of Granger-Causality. For Canadian art prices we use a new hedonic index that has been computed using an updated version of the data set of Hodgson and Vorkink (2004), while for the international prices, we use an index provided by Mei and Moses.
Nonprofit arts organizations often struggle for visibility and survival. They may meet these challenges by adopting new marketing strategies, forming administrative alliances with other organizations, or creating programming that appeals to broader audiences. Though these tactics are indeed important, arts organizations must first develop a persistent presence in their communities. This article proposes five key ingredients of persistent presence for nonprofit arts organizations and suggests that persistent presence can be consciously constructed by an organization, by an artistic discipline, and by the larger arts community. The intent of this exploratory framework for persistent presence may guide arts administrators in their work and propel future research in this area.
Although the market for Canadian paintings is now of substantial magnitude, with several works having recently sold for well over a million dollars, it remains true that with very few exceptions, the works of Canadian painters are bought and sold only in Canada and held only by Canadian collectors. This market can thus be viewed as almost exclusively local, and it is therefore not clear that there should be any linkage between price movements for Canadian art and those for the mainstream international market in old master, impressionist, and modern art. This paper investigates the presence and nature of such time series dependence econometrically, both in terms of long term trends as reflected in the co-integrating relationship between Canadian and the international market, and in terms of short-run co-movements as represented in correlations. The possibility that the local market "follows" the international one is also considered through an analysis of Granger-Causality. For Canadian art prices we use a new hedonic index that has been computed using an updated version of the data set of Hodgson and Vorkink (2004), while for the international prices, we use an index provided by Mei and Moses.
This paper investigates the price determinants and investment performance of art. We apply a hedonic regression analysis to a new data set of more than one million auction transactions of paintings and works on paper. Based on the resulting price index, we conclude that art has appreciated in value by a moderate 3.97% per year, in real U.S. dollar terms, between 1957 and 2007. This is a performance similar to that of corporate bonds—at much higher risk. A repeat-sales regression on a subset of the data demonstrates the robustness of our index. Next, quantile regressions document larger average price appreciations (and higher volatilities) in more expensive price brackets. We also find variation in historical returns across mediums and movements. Finally, we show that measures of high-income consumer confidence and art market sentiment predict art price trends.
This paper was accepted by Wei Xiong, finance.
While experiential marketing has become a cornerstone of recent advances in retailing, branding and events marketing, there is potential for its application in arts marketing to be extended and improved. The two main goals of this paper are to introduce and explain the Pine and Gilmore experiential marketing framework[Pine, II, B. J. and Gilmore, J. H. (1999) ‘The Experience Economy’, Harvard Business School Press, Boston.] and its relevance to arts marketing; and to discuss the implications of Pine and Gilmore's work for two specific areas of arts marketing: the unique dimensions of the arts experience, and the strategic and tactical steps involved in staging an experience. Copyright © 2004 Henry Stewart Publications
This paper analyzes auction results for over 4000 paintings by Australian Aboriginal artists to investigate determinants of prices in the Aboriginal art market. This is the first financial study of an indigenous art market, and hedonic, repeat sales and hybrid regression analyses find it shares price determinants with traditional art markets (with price premia attached to artist name, death, painting size, leading auction house, and winter sale). However, Aboriginal art's unique features significantly affect prices, particularly works that use traditional Aboriginal media and those with reputation-affirming traits. An Aboriginal Art Index provides 6.6% annual return (standard deviation 17.9%), which is comparable to traditional asset classes and superior on a risk-adjusted basis. Returns to Aboriginal art are negatively correlated with returns from other assets, and so it adds value to a diversified investment portfolio.
This paper shows that the price of a painting sold at an art auction and the experts' pre-sale valuations are anchored on the price at which the painting previously sold at auction. We are able to separate anchoring from rational learning by using the identifying strategy that the unobservable component of quality for a particular painting remains constant between the last auction sale and the current auction sale. We interpret these results as anchoring on the part of the buyers, with the sellers and auctioneers either anticipating anchoring on the part of the buyers or exhibiting anchoring effects themselves. (JEL D44, Z11)
The paper attempts an empirical investigation into a number of subjective determinants used in the evaluation of a work of art. Individuals' decisions to buy works of art seem based predominantly on aesthetic benefits. This is true for original pieces of art as well as for reproductions, i.e. there seems to be some substitutability between both kinds of objects. Major differences in the evaluation of originals and reproductions arise with respect to the secondary characteristics of art objects, not specifically with regard to the work of art itself. With respect to the willingness to pay (wtp) for a reproduction, a major impact seems to be whether or not the original work exists, i.e. a rationing effect seems to arise. The wtp for a reproduction also seems to depend on whether or not an individual earns his/her income in the arts sector.
We survey more than twenty studies estimating rates of return of investments in single art objects and whole collections and evaluate the various approaches to art price movements taken so far. The majority of the estimates find lower returns for investments in art objects than for investments in financial assets. However, most existing analyses are restricted to auction data and neglect transactions cost and taxation. They partly focus on mechanistic calculations and disregard the distinguishing institutional and behavioral characteristics of art markets. We look into the possibilities to capture and empirically estimate psychic returns from owning art.
How are prices established in the market for contemporary art? Buyers in this market are confronted with fundamental uncertainty since “quality” is only difficult to determine and the development of prices is non-predictable. Since the emergence of a market for contemporary art presupposes at least the possibility for intentional rational decision-making, this uncertainty must be reduced. We argue that the value of a piece of art or an artist is established in an intersubjective process of granting reputation by experts and institutions in the field of art. This is achieved primarily through the institutions of the art market and the training of artists, i.e. through galleries, curators, critics, art dealers, journalists, collectors, and art schools. They participate jointly in the making of artistic reputation of the artist’s work that provides, in turn, the basis for the determination of its economic value. For testing this hypothesis we assembled and analyzed two datasets with data on the biographies of artists and prices for their works.
AbstractThe aim of this paper is to model painting prices at auction. The novel aspects of our contribution are as follows: first, the set of regressors used as explanatory variables in the hedonic regression is wider than those previously employed in the literature. Second, we consider the selection bias arising from the possibility of unsold items. Finally, a model including pre sale evaluations by experts is also estimated which allows us to evaluate their information content.To do so, we use the Heckit model exploiting a unique dataset of 2817 Italian Contemporary Art painting transactions which took place at auction worldwide between 1990 and 2006.Our results suggest that auction prices depend upon four sets of regressors (artist identity, physical, artistic and sale characteristics of the painting); moreover, auction house, marketplace and year of sale seem to be crucial in getting artworks sold. Pre sale estimates seem to be a good predictor of painting prices but the hypothesis of their sufficiency is rejected and problems regarding the economic interpretation of the results arise.
Art price indexes typically rely on heavily biased samples for several reasons. A refined hedonic index is developed which explicitly addresses such concerns. An empirical illustration is then provided for Symbolist paintings appearing at auctions between 1990 and 2001.
We show that Baumol's conclusion that returns on bonds are higher than returns on paintings is too pessimistic. There are segments in the market for which returns are significantly higher than returns on bonds and stocks, during long periods of time (20 to 40 years); since tastes do change slowly (though not in a predictable way), this may imply that beating the market is not impossible. We also construct price indexes for paintings over the last 200 years.
Psychologists have found that the age at which successful practitioners typically do their best work varies across professions, but they have not considered whether these peak ages change over time, as economic models suggest they might. Using auction records, we estimate the relationship between artists' ages and the value of their paintings for two successive cohorts of leading modern American painters: de Kooning, Pollock, Rothko, and others born during 19001920 and Frank Stella, Warhol, and others born during 192140. We find that a substantial decline occurred over time in the age at which these artists produced their most valuableand most importantwork and argue that this was caused by a shift in the nature of the demand for modern art during the 1950s.
This paper argues for the recognition of important experiential aspects of consumption. Specifically, a general framework is constructed to represent typical consumer behavior variables. Based on this paradigm, the prevailing information processing model is contrasted with an experiential view that focuses on the symbolic, hedonic, and esthetic nature of consumption. This view regards the consumption experience as a phenomenon directed toward the pursuit of fantasies, feelings, and fun.
This paper presents an empirical study of paintings that have failed to meet their reserve price at auction. In the art trade it is often claimed that when an advertised item goes unsold at auction, its future value will be affected. We have constructed a new dataset specifically for the purpose of testing this proposition. To preview our results, we find that paintings that come to auction and failed return significantly less when they are eventually sold than those paintings that have not been advertised at auction between sales. These lower returns may occur because of common value effects, idiosyncratic downward trends in tastes, or changes in the seller's reserve price.
The literature on return and risk for investment in paintings is extended by disaggregating for artist, genre, and quality. A hedonic log price model generates yearly price indices and shadow values for painting characteristics using a large sample of U.S. artists sold at auction from 1971 to 1996. Overall returns to holding paintings are low, and have high annual variation although disparities are found across categories. High quality paintings show the highest returns, second only to equities, and are not offset by higher risk. Buying the highest quality superstar paintings seems to be the best overall investment strategy.
This paper contains a review of the burgeoning research that has been designed to shed light on how the art auction system actually works and what it indicates about price formation. First, we find that in recent years returns on art assets appear to be little different from returns on other assets. In addition, some researchers have found that because of the weak correlation between art asset returns with other returns, there may be a case for the inclusion of art assets in a diversified portfolio. Second, we find evidence of several anomalies in art market pricing. The evidence clearly suggests that, contrary to the view of the art trade, "masterpieces" underperform the market. In addition, there is considerable evidence that there are fairly long periods in which art prices may diverge across geographic areas and even auction houses. Third, we review the public record of the criminal trial of Sotheby`s former Chairman, who was accused of price fixing, to show how the collusion with Christie`s, the other great public auction house, was actually engineered. Contrary to the way the proceeds from the settlement of the civil suit in this case were distributed, we show that buyers were almost certainly not injured by the collusion, but that sellers were. In addition, based on the public record of settlement, it appears that the plaintiffs in the civil suit were very handsomely repaid for their injury. Finally, we review the extensive research on the effects of the auction institution on price formation. There is now considerable theoretical research on strategic behavior in auctions, much of it in response to empirical findings, and we review three key findings. First, the evidence suggests that art experts provide extremely accurate predictions of market prices, but that these predictions do not optimally process the publicly available information. Second, high reserve prices, and the resulting high unsold ("buy-in") rates are best explained as optimal search in the face of stochastic demand. Third, extensive research has documented that the prices of identical objects are more likely to decline than to increase when multiple units are sold, and this has led to considerable theoretical research. Subsequent empirical research has tended to document declining demand prices even when the objects are imperfect substitutes.
This paper advances a decision theoretical foundation for pricing scripts in the primary art market. We argue that while sociological factors play an important role, pricing scripts may well have economic determinants. We use a simple model of product differentiation implementing the undercut proof equilibrium concept to analyse the effects of the gallery’s and the artist’s reputation on the price the gallery charges. The results suggest that prices positively correlate with an artist’s reputation and negatively correlate with a gallery’s reputation. The model may therefore explain similar findings of recent empirical studies on pricing in the primary market for fine art. Copyright Springer Science+Business Media, LLC 2007
Many factors affect the supply and demand characteristics of artists' output.This exploratory study focuses on a ``supply-induced'' demand effect –the death of the artist and the assurance that, from the perspective of thedurable goods monopolist, the output of the artist ends. While not purportingto be a formal test of that proposition, we observe, using U.S. auction data,a clustered rise in artists' values immediately around the time of death andsuggest some possible demand-side explanations using a sample of LatinAmerican artists between 1977 and 1996. Copyright Kluwer Academic Publishers 2000
This study examines how art museums‘purchasing 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. Copyright Kluwer Academic Publishers 1997
We examine the market of Picassopaintings sold at auction between 1963 and 1994. Using the hedonic regression method we test whetherand in which way dimensions, materials used,signature, where and by whom the art work was sold,the catalogue raisonné number, working periods,exhibitions and provenance play a significant role inthe determination of the price. We find that manyfolk-assumptions are not supported by the data athand. Copyright Kluwer Academic Publishers 1997
The paper states that the quality of visual arts cannot be measured objectively. An artist must be credible to the public in order to generate economic value. How is credibility and thus economic value generated on the market? To judge the quality of arts, it takes experts. They form a worldwide network relationship and apply cultural knowledge, a highly specific type of knowledge which requires lifelong learning. Cultural knowledge is only in part of a factual nature and includes subjective elements. Since the public cannot in general ascertain the quality of an artist's oeuvre directly, experts must themselves be credible to the public in order to lend credibility to a given oeuvre. It is shown that the process by which experts generate public credibility for a given oeuvre is path dependent, i.e., may by chance end up at inferior solutions. Copyright Kluwer Academic Publishers 1997