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"Using a large data set with 80,214 repeat sales, we find that the real return on a diversified portfolio of modern prints sold at auctions worldwide averaged a modest 1.51% during the period 1977-2004. We address several issues regarding the performance of modern prints as investments: the selection bias arising from the self-interest of auction houses; the impact of an ever-expanding universe of auction houses on investment returns; the "masterpiece" effect, or whether more expensive works of art outperform the market as a whole; and the differences in returns that arise due to random fluctuations in collector tastes." ("JEL" Z11, G11, G14) Copyright (c) 2007 Western Economic Association International.

Chapter pages in book: (p. 291-324) 'Assumes that the nominal interest rate is 7.5%, initial capital is $100,000, annuity is payable with certainty for 10 years, and annuity payments are made at the end of the year. bAssumes a real interest rate of zero. If TI is the inflation rate in period r, then the nominal annuity payment B,= B,-* (1 + m,)/(I + RV) where RVis the interest rate used to determine the base annuity payment (B"); Bo equals RV * A/[ 1-(1 + RV) ' 1 where A is the initial capital; and Tis the number of years the annuity is payable. For RV=O, Bo equals AIT.