…the data shows that art performs well as an asset over time.
He offers plenty of evidence but I am skeptical. Studies of auction prices are usually biased toward the winners; the losers never go on the block again or are sold quietly at a loss through dealers. Many pieces turn out to be fakes. The placement costs in the dealer market can be higher than those at Sotheby’s. Storage and insurance costs for masterpieces are considerable. Art is so much fun it can’t earn the same rate of return as equity, otherwise no one would buy stocks.
Interesting, but it seems likely this analysis suffers from survivorship bias.
By focusing only on those paintings that continually are re-sold, it neglects the likely large negative returns of all other pieces. If the returns to these pieces weren’t negatiev they would likely have re-sold.
I agree with Tyler that the investment merits of art can’t match stocks or no one would buy stocks. It’s still possible that art could have the same average return as stocks but more systematic risk. I could see all of the big returns in art coming in the late stages of booms. While returns on the the Moses-Mei index don’t seem to be highly correlated with stock returns, at least one previous paper did find a high correlation:
Accounting for Taste: Art and the Financial Markets Over Three Centuries William N. Goetzmann American Economic Review, Vol. 83, No. 5 (Dec., 1993), pp. 1370-1376.
err…that is “Even if returns are good…”
Art is usually easy to sell at a reported price very different from the actual price, and thus is a good way to reduce taxes, legal damages, bankruptcy costs, and so on.
Wholesale vs. retail as my old stamp dealer used to say. Stamps were described in
money as a great investment. Unlike stocks the difference in stamps is immense
and often consumes any gains. He used to chortle at amateurs who thought of it
as investment. There are relatively few stock issues hence less broker margin. For stamps and other collectibles the variation is in the millions and hence the challenge of finding
just the right buyer for a particular piece. Notice that that at the high or
“investment” end there
are fewer issues and also correspondingly punishing prices. Only collect
expensive and at the low market timing if you want to play this game. The latter
is a good question indeed..
I found amazing artist from Poland, her name is Katarzyna Szeszycka and her PR Manager Micha³ Borowik. http://picasaweb.google.com/szeszycka/KatarzynaSzeszycka
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