Dynamic price dependence of Canadian and international art markets: an empirical analysis
TL;DR: In this paper, the authors investigated the presence and nature of such time series dependence econometrically, both in terms of long-term trends as reflected in the cointegrating relationship between Canadian and the international market, and in short-run co-movements as represented in correlations.
Abstract: Although the market for Canadian paintings is now of substantial magnitude, with several works having recently been 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 seem to be held only by Canadian collectors. This market can thus be viewed as largely local, and it is therefore not clear whether 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 article 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 dataset of Hodgson and Vorkink (Can J Econ 37:629–655, 2004), while for the international prices, we use an index provided by Mei and Moses (Am Econ Rev 92:1656–1668, 2002).
Figures (13)
Table 4 – Medium/support dummy parameter estimates (oil/canvas excluded) Each parameter measures effect of medium support relative to oil/canvas 
Table 5 – Genre dummy parameter estimates (landscape excluded) Each parameter measures effect of genre relative to landscape 
Table 2-- Top 25 Canadian Painters 
Table 3 – Individual artist dummy parameter estimates (A.Y. Jackson excluded) Each parameter measures effect of artist relative to Jackson 
Table 13 – Macroeconomic Variables to Explain Canadian Art Returns 
Table 10 – Real, Same-Currency Returns: raw statistics 
Table 11 – Granger causality statistics, real, same-currency returns (2 lags in VAR) 
Table 12 – Capital Asset Pricing Model (Dependent Variable: Excess returns of DJIA with respect to FF rate) 
Table 6 – Size and dating effects 
Table 7 - Unit root tests (real, same-currency prices & returns) (a) Log index (time trend and 1 lag included) 
Table 8 – Cointegration tests, real, same-currency prices (residual-based, with time trend in cointegrating regression of Canadian index on Mei-Moses and 1 lag in unit root tests) 
Table 9 – Nominal Returns: raw statistics 
Table 1: Hedonic price index and returns, 1968-2008
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01 Nov 2003
TL;DR: In this paper, the authors examined the short and long-term price linkages among major art and equity markets over the period 1976-2001 and found that there is a stationary long-run relationship and significant short-and long run causal linkages between the various painting markets and between the equity market and painting markets.
Abstract: This paper examines the short and long-term price linkages among major art and equity markets over the period 1976-2001. The art markets examined are Contemporary Masters, French Impressionists, Modern European, 19th Century European, Old Masters, Surrealists, 20th Century English and Modern US paintings. A global equity index (with dividends and capitalisation changes) is also included. Multivariate cointegration procedures, Granger non-causality tests, level VAR and generalised variance decomposition analyses based on error-correction and vector autoregressive models are conducted to analyse short and long-run relationships among these markets. The results indicate that there is a stationary long-run relationship and significant short and long run causal linkages between the various painting markets and between the equity market and painting markets. However, in terms of the percentage of variance explained most painting markets are relatively isolated, and other painting markets are generally more important than the equity market in explaining the variance that is not caused by innovations in the market itself. This suggests that opportunities for portfolio diversification in art works alone and in conjunction with equity markets exist, though in common with the literature in this area the study finds that the returns on paintings are much lower and the risks much higher than in conventional financial markets.
48 citations
TL;DR: In this paper, the authors aim to advance the idea of the network and the art fair with regard to art fair boom, the differentiation of art fairs and their interlinking.
Abstract: Although Howard Becker defines art worlds as networks of cooperating people and a broad range of studies has applied this idea of the network to art markets, research on fairs remains a neglected issue. This article aims to advance the idea of the network and the art fair with regard to the art fair boom, the differentiation of art fairs and their interlinking, and the role of networks with regard to the participating galleries and their interlinking within art fairs. Quantitative and qualitative data are brought forward to shed some light on these issues, including statistical information, along with interviews.
22 citations
Cites background from "Dynamic price dependence of Canadia..."
...The exportation of works of art declined and, as a result, prices dropped sharply (see Pesando 1993; Hodgson and Seçkin 2012)....
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TL;DR: In this paper, the authors examined the dynamics of the relationships between the prices in Turkish paintings auctions and international art markets during 1990-2005 using cointegration and Granger-causality tests.
Abstract: We examine the dynamics of the relationships between the prices in Turkish paintings auctions and international art markets during 1990–2005 using cointegration and Granger-causality tests. We also estimate the Capital Asset Pricing Model (CAPM) relationship between the Turkish and the global paintings markets. In our investigations, we employ a hedonic price index based on 1030 paintings by 13 Turkish painters and the global paintings market index as calculated by Artprice©. We find that the prices in the Turkish paintings market move in line with the international art markets in the long term. As expected, the direction of causality runs unilaterally from the international paintings market to the Turkish paintings market. The CAPM beta values were found to be unstable over time and not statistically significant at conventional levels. Hence, international art investors might be able to benefit from the higher returns in the Turkish paintings market while diversifying their art portfolios, especially in ...
21 citations
11 citations
TL;DR: In this paper, the authors analyzed the relationship between the international sculpture market and traditional financial investments during the 1985-2011 period and found that sculpture prices are Granger-caused by gross domestic product per capita.
Abstract: This article analyzes the dynamic relationship between the international sculpture market and the traditional financial investments during the 1985–2011 period. Three international sculpture price indexes are constructed using an ordinary least squares (OLS) hedonic pricing method as well as a quantile hedonic pricing method. Cointegration tests show that, price development in the sculpture market does not move together with either equity prices or government bond prices in the long run. Furthermore, cointegration is only detected when gross domestic product (GDP) per capita is considered. When the lower-end and upper-end sculpture market segments are looked at separately, the latter exhibits long-run interdependencies with the international painting market, while the former does not. Granger-causality tests reveal that sculpture prices, in general, are Granger-caused by GDP per capita. In the longrun, however, GDP per capita does not Granger-cause the upper-end segment. Moreover, the Granger-causality tests indicate that sculpture price developments neither follow nor are followed by equity price movements.
11 citations
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TL;DR: In this article, steady-state relationships between prices for paintings obtained by three groups of painters (Impressionist, Modern and Contemporary European Masters, Other minor European painters, Contemporary US painters) at public auctions in New York, London and Paris between 1962 and 1991 were studied.
Abstract: We study steady-state relationships between prices for paintings obtained by three groups of painters (Impressionist, Modern and Contemporary European Masters, Other minor European painters, Contemporary US painters) at public auctions in New York, London and Paris between 1962 and 1991. The analysis is carried out by estimating Vector autoregressive models, using the recent techniques developed by Johansen. The results show that the various markets move closely together, and are, even in New York, led by what happens to the group of European Great Masters, whose prices are not influenced by other prices. We also examine the relation between art and stock markets; we find that there is no long-run relation between these two assets, though in the short-run, financial markets do influence art markets.
89 citations
TL;DR: In this article, the authors used a hedonic regression model to construct a price index for Australian fine-art auctions over the period 1973-2003, and found that works executed in oils or acrylic, and those auctioned by Sotheby's or Christie's had higher prices.
Abstract: In this study, 37 605 paintings by 60 well-known Australian artists sold at auction over the period 1973–2003 are used to construct a hedonic price index. The attributes included in the hedonic regression model include the name and living status of the artist, the size and medium of the painting and the auction house and year in which the painting was sold. The resulting index indicates that returns on Australian fine-art averaged 7 per cent over the period with a standard deviation of 16 per cent. The hedonic regression model also captures the willingness to pay for perceived attributes in the artwork, and this shows that works by McCubbin, Gascoigne, Thomas and Preston and other artists deceased at the time of auction, works executed in oils or acrylic, and those auctioned by Sotheby's or Christie's are associated with higher prices. [ABSTRACT FROM AUTHOR]
78 citations
Posted Content•
TL;DR: The authors applied standard asset pricing theory, as incorporated in the capital asset pricing model (CAPM), to the analysis of price movements in the market for Canadian paintings, using a sample of auction prices for major Canadian painters for the period 1968-2001.
Abstract: The valuation of Canadian paintings is analysed empirically. Using a sample of auction prices for major Canadian painters for the period 1968-2001, we run hedonic regressions to analyse the influence of various factors, including painter identity, on auction prices, as well as to construct a market price index. This index is used in a second-stage analysis in which we analyse the properties of Canadian art viewed as an investment asset. We apply standard asset pricing theory, as incorporated in the capital asset pricing model (CAPM), to the analysis of price movements in the market for Canadian paintings.
76 citations
"Dynamic price dependence of Canadia..." refers background or methods or result in this paper
...While Hodgson and Vorkink (2004) provide independent evidence (relative to the existing literature) on the general question of the properties of art as an investment, our findings indicate that the prices in the Canadian paintings auctions and the international art market prices are not…...
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...See, for example, Arvin and Scigliano (2004), Hodgson and Vorkink (2004), and Hodgson (in press) for returns to Canadian painters’ works; Higgs and Worthington (2005) for Australian painters’ works; Agnello and Pierce (1996) on genre effects on American art investments; Edwards (2004) on Latin…...
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...This paper extends the hedonic price index presented in Hodgson and Vorkink (2004) by updating the data set until the first half of 2008....
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...This point is also mentioned in Hodgson and Vorkink (2004)....
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...This result is not surprising since he is considered to be the most important painter in developing an original national style of Canadian landscape that inspired the Group of Seven, whose members are mostly in the top 25 list.8 The top list also includes old masters such as 7 See Velthius (2005), p.99....
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TL;DR: In this article, the valuation of Canadian paintings is analyzed empirically using a sample of auction prices for major Canadian painters for the period 1968-2001, run hedonic regressions to analyze the in ǫuence of various factors, including painter identity, on auction prices, as well as to construct a market price index.
Abstract: The valuation of Canadian paintings is analyzed empirically. Using a sample of auction prices for major Canadian painters for the period 19682001, we run hedonic regressions to analyze the in‡uence of various factors, including painter identity, on auction prices, as well as to construct a market price index. This index is used in a second stage analysis in which we analyze the properties of Canadian art viewed as an investment asset. We consider the extent to which standard asset pricing theory, as incorporated in the capital asset pricingmodel (CAPM), can account for price movements in the market for Canadian paintings.
75 citations
Posted Content•
TL;DR: In this article, the authors compare the performance of hedonic and repeat-sales estimators, and try to interpret in economic terms what both are trying to achieve, and give some guidelines on collecting data, and the choice between RSR and HR that this induces.
Abstract: While there are no significant investment characteristics that inhibit art from being considered as an asset, a major hurdle has long been the lack of a systematic measure of its financial performance. Due to its heterogeneity (each piece is different) and its infrequency of trading (the exact same piece does not come to the market very often), the determination of changes in market value is difficult to ascertain. Two estimation methods are commonly used to construct indices. Repeat-sales regression (RSR) uses prices of individual objects traded at two distinct moments in time. If the characteristics of an object do not change (which is usually so for collectibles), the heterogeneity issue is bypassed. The basic idea of the hedonic regression (HR) method is to regress prices on various attributes of objects (dimensions, artist, subject matter, etc.) and to use the residuals of the regression which can be considered as "characteristic-free prices" to compute the price index. The chapter deals with the basics of hedonic and repeat-sales estimators, and tries to interpret in economic terms what both are trying to achieve. It also goes into some more technical details which may be useful for researchers who want to construct such indices, and gives some guidelines on how to go about collecting data, and the choice between RSR and HR that this induces. Both methods are compared using simulated returns, pointing to which method should be used given the data at hand.
62 citations