22 April 2010

Report: Investments in Painting (2001)

Title: Investments in Painting: The interaction of monetary return and psychic income

Author: M.M.G. Fase
Year: 2001
Pages: 76
Type of document: report
ISBN: 3-902109-05-X
Link: http://dare.uva.nl/... (pdf, 495 Kb)

The financial press gives very regular attention to art and culture in their many forms. Business newspapers such as the Financial Times, the Wall Street Journal, Het Financieele Dagblad and De Financieel Economische Tijd give over plenty of space in their weekend editions to news of art auction prices and exhibitions of major or less well-known works. As well as this practical outlook, more theoretical economists have given increasing attention to the economics of art since the 1970s. There has been a remarkably large amount of research into the pricing of art and the closely associated subject of the return on purchases of art. This centres on painting in general and on individual painters. The attention to painting in the business press is without doubt prompted by the need for journalistic variety, plus the wish to impart a cultural element to the reporting. The provision of market information to readers is, of course, another significant motive. It is less simple to explain the academic interest of economists. At first sight, it seems exotic. But that is a hasty conclusion. Along with intellectual curiosity, there is probably a role for the need to apply trusted analytical methods to new areas of research. Whatever the reason, there is a place for the systematic study of the literature on the sense and nonsense of investing in painting and this is the objective of this paper. It is, however, also a report of explorations in a field that has fascinated me personally as an economist for many years.

Table of contents:

1. Introduction
1.1. A historical illustration from the art world
1.2. Practice in the international art trade

2. Investment Theory in Brief
2.1. Some basic principles of portfolio theory
2.2. Behavioural finance as an alternative approach
2.3. Art as an element of an investment portfolio

3. The Market for Paintings
3.1. The nature of the art market
3.2. Size of the art trade

4. The Price of Paintings
4.1. Auction prices
4.2. A price index for art
4.3. Example of a price index for nineteenth-century paintings

5. Art as Investment
5.1. Actual return on painting in general
5.2. The return on specific movements or painters
5.3. Return on investments in antiques and other collectibles
5.4. Once again, the return on specific painters

6. Rates of return considered closely
6.1. The monetary yield on art and the market rate of interest
6.2. The market for paintings as a segment of the international capital market

7. In Conclusion some Policy Implications

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