Dynamic price dependence of Canadian and international art markets: an empirical analysis

doi:10.1007/S00181-011-0502-Z

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Dynamic price dependence of Canadian and international art markets: an empirical analysis

Journal Article•DOI•

Dynamic price dependence of Canadian and international art markets: an empirical analysis

Douglas J. Hodgson¹, Aylin Seckin²•Institutions (2)

Université du Québec à Montréal¹, Istanbul Bilgi University²

01 Oct 2012-Empirical Economics (Springer-Verlag)-Vol. 43, Iss: 2, pp 867-890

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.

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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).

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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 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 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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Art as an investment: short and long-term comovements in major painting markets

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Andrew C. Worthington¹, Helen Higgs¹•Institutions (1)

Queensland University of Technology¹

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.

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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.

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48 citations

Journal Article•DOI•

The Art Fair as Network

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Christian Morgner¹•Institutions (1)

University of Leicester¹

07 Mar 2014-Journal of Arts Management Law and Society

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.

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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.

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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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Journal Article•DOI•

An analysis of the price dynamics between the Turkish and the international paintings markets

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Erdal Atukeren, Aylin Seçkin

15 Oct 2009-Applied Financial Economics

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.

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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 ...

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21 citations

Journal Article•DOI•

A Concise History of Canadian Painting

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Lillian B. Miller

01 Sep 1974-History: Reviews of New Books

11 citations

Journal Article•DOI•

Sculpture as an alternative investment : an analysis of price dynamics between sculpture and equity and bond markets

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Rustam Vosilov¹•Institutions (1)

Umeå University¹

31 Mar 2015-The Journal of Alternative Investments

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.

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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.

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11 citations

References

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Journal Article•DOI•

An analysis of the price dynamics between the Turkish and the international paintings markets

[...]

Erdal Atukeren, Aylin Seçkin

15 Oct 2009-Applied Financial Economics

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21 citations

"Dynamic price dependence of Canadia..." refers background or result in this paper

...40 found by Atukeren and Seckin (2009) to exist between the Turkish and international indices....
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...Although there is some contemporaneous correlation between the series, it is quite weak, and much smaller than the correlation coefficient of 0.40 found by Atukeren and Seckin (2009) to exist between the Turkish and international indices....
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...…relationship in the Canadian market is very similar to that found in many other studies of mainstream markets (see Worthington and Higgs (2003) and Atukeren and Seckin (2009) for surveys of the literature): viz., that the average rate of increase of art prices equals that of government bonds,…...
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...An additional interest in an investigation of the degree of dependence of Canadian and mainstream markets stems from the findings of Hodgson and Vorkink (2004) that the risk-return relationship in the Canadian market is very similar to that found in many other studies of mainstream markets (see Worthington and Higgs (2003) and Atukeren and Seckin (2009) for surveys of the literature): viz....
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...Along these lines, Atukeren and Seckin (2009) examine the correlation and price dependence of Turkish and international art markets...
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Journal Article•DOI•

Home and regional biases and border effects in Armington type models

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John Whalley¹, John Whalley², John Whalley³, Xian Xin⁴, Xian Xin² - Show less +1 more•Institutions (4)

Centre for International Governance Innovation¹, University of Western Ontario², National Bureau of Economic Research³, China Agricultural University⁴

01 Mar 2009-Economic Modelling

TL;DR: The authors discuss biases in preferences and their trade effects in terms of impacts on non-neutral trade flows motivated by recent literature on both home bias and the border effect, and assess the contribution of each form of bias to the set of possible trade effects using a calibrated model with 3 Canadian regions, the U.S., and the rest of the world using 2001 data.

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21 citations

Posted Content•

Art and the Economy: A First Look at the Market Paintings in Turkey

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Aylin Seçkin, Erdal Atukeren

05 Sep 2006-Economics Bulletin

TL;DR: In this paper, the authors investigated the relationship between the return on investments in paintings and other financial investments in Turkey and found that investing in the market for paintings is a viable alternative even in an environment of high inflation and large macroeconomic volatility.

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Abstract: We investigate the relationships between the return on investments in paintings and other financial investments in Turkey. To this aim, we estimate a hedonic price index for a portfolio of Turkish painters. We find that investing in the market for paintings is a viable alternative even in an environment of high inflation and large macroeconomic volatility. The portfolio under investigation yielded a small but positive real return. Still, stock market returns are higher than the returns in the art market. Furthermore, we find a rather high correlation between stock returns and art market returns. However, the returns to investing in paintings are negatively correlated with the returns on traditional investment alternatives in a developing country context, such as foreign exchange, gold, and bank deposits. Hence, there might exist some room for portfolio diversification. Nevertheless, the time horizon of the investments is a key factor especially in portfolios involving art objects.

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20 citations

"Dynamic price dependence of Canadia..." refers background in this paper

...…Worthington (2005) for Australian painters’ works; Agnello and Pierce (1996) on genre effects on American art investments; Edwards (2004) on Latin American paintings, and Mok, et al (1993) on the returns to modern Chinese paintings and Seckin and Atukeren (2006) on the returns to Turkish paintings....
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Journal Article•DOI•

A Concise History of Canadian Painting

[...]

Lillian B. Miller

01 Sep 1974-History: Reviews of New Books

11 citations

"Dynamic price dependence of Canadia..." refers background in this paper

...Our data set includes results on sales for painters judged to be of significant interest from the standpoint of Canadian art history, this criterion being satisfied if a painter is mentioned in one of the major histories of Canadian art written by Harper (1977) or Reid (1973, 1988)2....
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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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...5 See Reid (1979)....
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...This result is discussed by Hodgson and Vorkink 6 See Hodgson and Vorkink (2004) for a detailed description of this method....
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...3 See Reid (1973)....
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Journal Article•DOI•

An analysis of pricing and returns in the market for French Canadian paintings

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Douglas J. Hodgson¹•Institutions (1)

Université du Québec à Montréal¹

01 Jan 2011-Applied Economics

TL;DR: In this article, the valuation of French Canadian paintings is analyzed empirically using a sample of auction prices for major French Canadian painters for the period 1968 to 2005, run hedonic regressions to determine the influence of various factors, including painter identity, on auction prices, as well as construct a market price index.

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Abstract: The valuation of French Canadian paintings is analysed empirically Using a sample of auction prices for major French Canadian painters for the period 1968 to 2005, we run hedonic regressions to determine the influence of various factors, including painter identity, on auction prices, as well as to construct a market price index This is then used in a second stage analysis of the properties of these art works viewed as investment assets We consider the extent to which standard asset pricing theory, as represented by the capital asset pricing model, can account for price movements in the market for French Canadian paintings

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11 citations

"Dynamic price dependence of Canadia..." refers background or methods in this paper

...Canadian art market is largely driven by internal factors independent of the international market, then the results of Hodgson and Vorkink (2004) would be of greater interest to those with a general interest in the question of art as an investment, as they would...
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...The top 25 list of painter dummy estimates of Hodgson and Vorkink (2004) seems to stay almost identical with the updated dataset (Table 2)....
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...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 (2002)....
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...This point is also mentioned in Hodgson and Vorkink (2004). 8 The Group of Seven’s founding members were Frank Carmichael, Lawren S....
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...This is a different question than the one that was asked by Hodgson and Vorkink (2004). They use the Toronto Stock Exchange as the market proxy, to examine portfolio diversification capabilities of Canadian paintings in the case of Canadian investors, who are assumed to be mostly invested in Canadian stocks....
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