Constructing the true art market index : a novel 2-step hedonic approach and its application to the german art market

  • This study develops a novel 2-step hedonic approach, which is used to construct a price index for German paintings. This approach enables the researcher to use every single auction record, instead of only those auction records that belong to a sub-sample of selected artists. This results in a substantially larger sample available for research and it lowers the selection bias that is inherent in the traditional hedonic and repeat sales methodologies. Using a unique sample of 61,135 auction records for German artworks created by 5,115 different artists over the period 1985 to 2007, we find that the geometric annual return on German art is just 3.8 percent, with a standard deviation of 17.87 percent. Although our results indicate that art underperforms the market portfolio and is not proportionally rewarded for downside risk, under some circumstances art should be included in an optimal portfolio for diversification purposes.

Download full text files

Export metadata

Additional Services

Share in Twitter Search Google Scholar
Author:Roman KräusslORCiDGND, Niels van Elsland
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2008,11
Series (Serial Number):CFS working paper series (2008, 11)
Document Type:Working Paper
Year of Completion:2008
Year of first Publication:2008
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2008/04/11
Tag:art investments; diversification; downside risk; hedonic model; optimal asset allocation
Issue:Version March 2008
Page Number:41
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht