2016/34 | LEM Working Paper Series | ||||||||||||||||
Art Auctions and Art Investment in the Golden Age of British Painting |
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Federico Etro and Elena Stepanova |
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Keywords | |||||||||||||||||
Art investment, Price of paintings, British Golden Age, Hedonic regressions, CAPM
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JEL Classifications | |||||||||||||||||
Z11, N0, D4
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Abstract | |||||||||||||||||
We analyze the evolution of the price of paintings in London auctions
with a unique dataset of over 200,000 sales in the period
1780-1840. We build a price index for the representative painting
through hedonic regressions controlling for the characteristics of
auctions and paintings and for the artists' fixed effects. The
emergence of an efficient secondary art market was an important
opportunity for portfolio diversification. Estimating a CAPM model for
art investment suggests that British paintings could deliver a higher
return compared to imported paintings and an attractive source of
diversification relative to the contemporary stock market. This
contributed to increase demand for British art and, possibly, to
promote the innovations of its Golden Age. While the representative
painting of the British school was initially undervalued, new British
painters reached foreign prices by the beginning of 1800s.
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