How Did Japanese Investments Influence International Art Prices?

Hiraki, Takato; Ito, Akitoshi; Spieth, Darius A.; Takezawa, Naoya

doi:10.1017/s0022109009990366

Cited by 58 publications

(40 citation statements)

References 18 publications

(17 reference statements)

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“…Besides, there is a strong persistence in this type of academic recognition of artistic quality. 17 The art market boom in the late 1980s was partly driven by strong Japanese investor demand (Hiraki et al, 2009). 18 We start from real prices because the shadow prices of the hedonic characteristics (as measured by the hedonic coefficients) would otherwise be impacted by inflation over our time frame.…”

Section: Methodology and Variablesmentioning

confidence: 99%

Buying Beauty: On Prices and Returns in the Art Market

Renneboog

Spaenjers

2012

SSRN Journal

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This paper investigates the evolution of prices and returns in the art market since the middle of the previous century. We first compile a comprehensive list of more than 10,000 artists and then build a dataset that contains information on more than 1.1 million auction sales of paintings, prints, and works on paper. We perform an extensive hedonic regression analysis that includes unique price-determining variables capturing amongst others: the artist's reputation, the strength of the attribution to an artist, and the subject matter of the work. Based on the resulting price index, we conclude that art has appreciated in value by a moderate 4.03% per year, in real USD terms, between 1951 and 2007. During the art market boom period 2002-2007, prices augmented by 11.60% annually, which explains the increased attention to 'art as an investment'. Furthermore, our results show that, over the last quarter of a century, prices of oil paintings and of post-war art have risen faster than the overall market. In contrast to earlier studies, we find evidence of a positive masterpiece effect: high-quality art makes a better investment. Our results are robust to alternative model specifications, and do not seem influenced by sample selection or survivorship biases. When comparing the long-term returns on art to those on financial assets, we find that art has underperformed stocks but outperformed bonds. However, between 1982 and 2007, bonds yielded higher average returns (at a lower risk) than art. Buyers of art should thus expect to reap non-pecuniary benefits rather than high financial returns, especially because the modest art returns are further diminished by substantial transaction costs. BUYING BEAUTY: ON PRICES AND RETURNS IN THE ART MARKET AbstractThis paper investigates the evolution of prices and returns in the art market since the middle of the previous century. We first compile a comprehensive list of more than 10,000 artists and then build a dataset that contains information on more than 1.1 million auction sales of paintings, prints, and works on paper. We perform an extensive hedonic regression analysis that includes unique price-determining variables capturing amongst others: the artist's reputation, the strength of the attribution to an artist, and the subject matter of the work. Based on the resulting price index, we conclude that art has appreciated in value by a moderate 4.03% per year, in real USD terms, between 1951 and 2007. During the art market boom period 2002-2007, prices increased by 11.60% annually, which explains the heightened attention to 'art as an investment'. Furthermore, our results show that, over the last quarter of a century, prices of oil paintings and of post-war art have risen faster than the overall market. In contrast to earlier studies, we find evidence of a positive masterpiece effect: high-quality art makes a better investment. Our results are robust to alternative model specifications, and do not seem influenced by sample selection or survivorship biases. When comparing ...

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Section: Methodology and Variablesmentioning

confidence: 99%

Buying Beauty: On Prices and Returns in the Art Market

Renneboog

Spaenjers

2012

SSRN Journal

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“…Japanese investors, through a "wealth effect" that gave them access to loans backed by the collateral value of lands and skyrocketing real estate prices in an overheated economy, had invested massively in international art markets in the late 1980s. When the uncontrolled credit expansion was stopped and the economy no longer sustained by an excessive monetary easing policy, prices of real estate and land started to declining, forcing Japanese investors to sell their holdings in art even at considerable bargains (Hiraki et al, 2009). Figure IV We observe that even though there exist some discrepancies amongst the origination dates of bubbles in the four studied subsamples, the termination dates coincide always perfectly.…”

Section: Bubble Detectionmentioning

confidence: 99%

Is There a Bubble in the Art Market?

2014

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Abstract:The record-breaking prices observed in the art market for the last three years have rais the question of whether we are experiencing a speculative bubble. Given the difficulty to determine the fundamental value of artworks, we apply a right-tailed unit root test with forward recursive regressions (SADF test) to detect explosive behaviors directly in the time series of four different art market segments ("Impressionist and Modern", "Post-war and Contemporary", "American", and "Latin American") for the period from 1970 to 2013. We identify two historical speculative bubbles and find an explosive movement in today's "Post-war and Contemporary" and "American" fine art market segments. AbstractThe record-breaking prices observed in the art market over the last three years raise the question of whether we are experiencing a speculative bubble. Given the difficulty to determine the fundamental value of artworks, we apply a right-tailed unit root test with forward recursive regressions (SADF test) to detect explosive behaviors directly in the time series of four different art market segments ("Impressionist and Modern", "Post-warand Contemporary", "American", and "Latin American") for the period from 1970 to 2013. We identify two historical speculative bubbles and find an explosive movement in today's "Post-war and Contemporary" and "American" fine art market segments.Keywords: Art market; Alternative investments; Speculative bubbles; Explosive behavior JEL Codes: G12, G14, Z11 You can reach the authors via roman.kraussl@uni.lu, thorsten.lehnert@uni.lu, and nicolas.martelin@uni.lu. We thank Ali Nasser Edine for helpful comments.2

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“…Empirically, Aït-Sahalia et al (2003) find a strong correlation between stock market returns and luxury consumption (and show that this result goes a far way in explaining the equity premium puzzle). Likewise, Hiraki et al (2009) provide compelling evidence that such a "luxury consumption hypothesis" is valid in the art market. The authors use data on stock market returns, import/export flows, and art prices to show that wealth shocks to Japanese investors affected their art purchases in the 1980s, and that this led to higher prices for art.…”

Section: Related Literaturementioning

confidence: 89%

Art and Money

Goetzmann¹,

Renneboog²,

Spaenjers³

2009

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This paper investigates the impact of equity markets and top incomes on art prices. Using a long-term art market index that incorporates information on repeated sales since the eighteenth century, we demonstrate that both same-year and lagged equity market returns have a significant impact on the price level in the art market. Over a shorter time frame, we also find empirical evidence that an increase in income inequality may lead to higher prices for art, in line with the results of a numerical simulation analysis. Finally, the results of Johansen cointegration tests strongly suggest the existence of a long-term relation between top incomes and art prices.

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How Did Japanese Investments Influence International Art Prices?

Cited by 58 publications

References 18 publications

Buying Beauty: On Prices and Returns in the Art Market

Buying Beauty: On Prices and Returns in the Art Market

Is There a Bubble in the Art Market?

Art and Money

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