The monetary appreciation of paintings: from realism to Magritte |
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Authors: | Renneboog Luc; Van Houtte Tom |
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Institution: | Department of Finance and CentER, Tilburg University, and Pricewaterhouse Coopers. |
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Abstract: | This study investigates how investments in paintings comparewith those in stocks in terms of riskreturn trade-offusing Sharpe and Treynor ratios and Markowitz efficient frontiers.A large database was analysed consisting of more than 10,500auction prices of Belgian paintings over the period 197097.These paintings are the auctioned oeuvre of 71 internationallyrecognised painters representing the main artistic schools (fromsocial realism to surrealism) over the period 18501950.Hedonic art returns are corrected for auction location and auctionhouse, artistic school, painters' reputation, medium, signatureand painting size. Surrealism and luminism have been the mostpopular currents of art (in monetary terms), while expressionismand symbolism have gained (financial) esteem. This study concludesthat art investments underperform equity market investmentsowing to the high risk of investing in art and its high transactioncosts, resale rights and insurance premia. In addition, theMarkowitz efficient frontier shows limited diversification potentialfor art. |
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Keywords: | Investing in art Hedonic regression Markowitz efficient frontier Portfolio diversification |
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