Construction Of Hedonic Price Index For The “Most Liquid” Polish Painters

• Authors: Krzysztof Kompa , Dorota Witkowska
• Languages of publication: EN

Abstracts

EN

Art market has been developing in Poland and the first Art Fund was established in 2011. Therefore it seems that investment in art can be considered as alternative form by Polish investors. In order to decide whether art is a good investment, it is necessary to evaluate expected returns which might be obtained from such investment thus an art price index should be developed. The aim of the paper is to discuss artworks as investment assets and evaluate price index of paintings produced by 11 Polish artists whose artworks were traded the most often on auctions that were held in Poland in the years 2007–2010. In our research, employing data concerning 750 objects, we apply the hedonic index methodology to estimate returns from the paintings market. The results of our investigation show that hedonic quality adjustment essentially influences evaluation of artwork prices therefore we propose the aggregated hedonic index which might better describe situation at the art market than the hedonic index biased by the specification of a single model.

Keywords

EN

art market; hedonic price index; investment; C43; C51; G10; Z11

• Publisher: Sciendo
• Journal: Folia Oeconomica Stetinensia
• Year: 2014
• Volume: 14
• Issue: 2
• Pages: 76-100

Dates

published

2014-12-01

received

2014-03-24

accepted

2014-12-15

online

2015-06-03

Contributors

author

Krzysztof Kompa

• Warsaw University of Life Sciences, Department of Econometrics and Statistics, Nowoursynowska 166, 02-787 Warszawa, Poland

author

Dorota Witkowska

• University of Lodz, Department of Finance and Strategic Management, Matejki 22/26, 90-237 Łódź, Poland

References

• Adamowska, W. (2008). Is Art Such a Good Investment? Investing in Fine Art on the International and Polish Action Market. Unpublished Master thesis written under the supervision of F. Vermeylen, Erasmus University, Rotterdam.
• Anderson, R.C. (1974). Paintings as an Investment. Economic Inquiry, 12 (1), 13–26.[Crossref]
• Ashenfelter, O. & Graddy, K. (2006). Art Auctions. In: Eds. V. Ginsburgh & D. Throsby. Handbook of the Economics of Arts and Culture (pp. 909–945). Amsterdam, North Holland: Elsevier.[WoS]
• Campbell, R.A.J. (2004). The Art of Portfolio Diversification. LIFE working paper, No. 04-009, Maastricht University. Retrieved May 19, 2011, from .
• Campbell, R.A.J. (2008). Art as a Financial Investment. The Journal of Alternative Investments, 10 (4), 64–81. DOI: 10.3905/jai.2008.705533.[Crossref]
• Candela, G., & Scorcu, A.E. (1997). A Price index for Art Market Auctions. An Application to the Italian Market of Modern and Contemporary Oil Paintings. Journal of Cultural Economics, 21 (3), 175–196.[Crossref]
• Candela, G., Figini, P. & Scorcu, A.E. (2004). Price Indices for Artists – A Proposal. Journal of Cultural Economics, 28 (4), 285–302.[Crossref]
• Deloitte, (2013). Rynek sztuki. Sztuka rynku, (12.11.2013).
• Frey, B.S. & Cueni R. (2013). Why Invest in Art? The Economist’s Voice, 10 (1), 1–6. DOI: 10.1515/ev-2013-0014.[Crossref]
• Frey, B.S. & Pommerehne, W.W. (1988). Is Art Such a Good Investment? The Public Interest, 91, 79–86, .
• Frey, B.S. & Pommerehne, W.W. (1989a). Art Investment: An Empirical Inquiry. Southern Economic Journal, 56 (2), 396–409, .
• Frey, B.S. & Pommerehne, W.W. (1989b). Muses and Markets. Explorations in the Econo-mics of the Arts. Cambridge, MA: Basil Blackwell.
• Gajewski, M. & Potocki, T. (2013). Skate’s Focus: Poland’s Art Market The Rising Star of Central Europe. Report created by Skate’s Art Market Research Art & Business Magazine SA, Skate’s, LLC, New York, NY, USA. Retrieved from (29.01.2014).
• Ginsburgh, V., Mei, J. & Moses, M. (2006). The Computation of Prices Indices. In: Eds. V. Ginsburgh, D. Throsby. Handbook of the Economics of Art and Culture (Vol. 1, chap. 27, pp. 947–979).
• Ginsburgh, V. & Schwed, N. (1992). Price Trends for Old Masters’ Drawings: 1980–1991. The Art Newspaper, September 1992, (5.01.2014).
• Goetzmann, W.N., Renneboog, L. & Spaenjers, C. (2011). Art and Money. American Economic Review, 101 (3), 222–226. DOI: 10.1257/aer.101.3.222.[Crossref][WoS]
• Higgs, H. (2012). Australian Art Market Prices during the Global Financial Crisis and two Earlier Decades. Australian Economic Papers, 51 (4), 189–209. DOI: 10.1111/1467-8454.12001.[WoS][Crossref]
• Higgs, H. & Worthington, A. (2005). Financial Returns and Price Determinants in the Australian Art Market: 1973–2003. Economic Record, 81 (253), 113–123.
• Hsieh, S., Lee, J. & Tzeng, L.Y. (2010). Art as an Investment: Empirical Study of Asian Contemporary and Chinese 20th Century Modern Art. International Conference on Finance Department of Finance, National Taiwan University, December 10–11, 2010, (27.12.2012).
• Kompa, K. & Witkowska, D. (2013). Indeks rynku sztuki. Badania pilotażowe dla wybranych malarzy polskich. Zarządzanie i Finanse, 11 (3/2), 33–50. Prace i Materiały Wydziału Zarządzania Uniwersytetu Gdańskiego.
• Kraeussl, R. & van Elsland, N. (2008). Constructing the True Art Market Index – A Novel 2-Step Hedonic Approach and its Application to the German Art Market. CFS working paper, No. 2008/11, Center for Financial Studies Frankfurt University.
• Kraeussl, R. & Logher, R. (2010). Emerging Art Markets. Emerging Markets Review, 11 (4), 301–318. DOI: 10.1016/j.ememar.2010.07.002.[Crossref]
• Kraeussl, R. & Wiehenkamp, Ch. (2012). A call on Art investments. Review of Derivatives Research, 15 (1), 1–23. DOI:10.1007/s11147-011-9061-x.[Crossref]
• Landes, W.M. (2000). Winning the Art Lottery: The Economic Returns to the Ganz Collection. John M. Olin Law and Economics Working Paper, No. 76, Second series, The Law School, University of Chicago, Chicago.
• Locatelli-Biey, M. & Zanola, R. (2002). The Sculpture Market: An Adjacent Year Regression Index. Journal of Cultural Economics, 26 (1), 65–78. DOI: 10.1023/A:1013309816736.[Crossref]
• Lucińska, A. (2012). Rozwój artystyczny malarzy a ceny obrazów na polskim rynku sztuki. In: Ed. D. Zarzecki. Finanse, Rynki Finansowe, Ubezpieczenia, 51, (pp. 715–725), Zeszyty Naukowe Uniwersytetu Szczecińskiego.
• Mc Andrew, C. (2013). TEFAF Art market report 2013 The global art market, with a focus on China and Brazil. The European Fine Art Foundation, TEFAF Maastricht.
• Mei, J. & Moses, M. (2002). Art as an Investment and the Underperformance of Masterpieces. American Economic Review, 92 (5), 1656–1668. DOI: 10.1257/000282802762024719.[WoS][Crossref]
• Mok, H.M.K., Ko, V.W.K., Woo, S.S.M. & Kwok, K.Y.S. (1993). Modern Chinese Paintings: An Investment Alternative. Southern Economic Journal, 59 (4), 808–816, .
• Nesheim, L. (2006). Hedonic Price Functions. London: CEMMAP.
• Pesando, J.E. (1993). Art as an Investment: The Market for Modern Prints. American Economic Review, 83, 1075–1089.
• Pesando, J.E. & Shum, P.M. (1999). The Returns to Picasso’s Prints and to Traditional Financial Assets, 1977 to 1996. Journal of Cultural Economics, 23 (3), 183–192. DOI: 10.1023/A:1007595305661.[Crossref]
• Renneboog, L. & Van Houtte, T. (2002). The Monetary Appreciation of Paintings: From Realism to Magritte. Cambridge Journal of Economics, No. 26, 331–357. DOI: 10.1093/cje/26.3.331.[Crossref]
• Renneboog, L. & Spaenjers, C. (2012). Buying Beauty on Prices and Returns in the Art Market. Management Science, 59 (1), 36–53. DOI: 10.2139/ssrn.1352363.[Crossref][WoS]
• Sokołowska, E. (2012). Ewolucja i perspektywy rozwoju art investment jako alternatywnej formy inwestowania. In: Ed. M. Piłatowska. Ekonometria dla praktyki (pp. 159–175). Toruń: Polskie Towarzystwo Ekonomiczne.
• Triplett, J. (2006). Handbook on Hedonic Indexes and Quality Adjustments in Price Indexes: Special Application to Information Technology Products. Paris: OECD Publishing.
• Widłak, M. (2010). Metody wyznaczania hedonicznych indeksów cen jako sposób kontroli zmian jakości dóbr. Wiadomości Statystyczne, 9 (592), 1–25.
• World Wealth Report (2012). Capgemini and RBC Wealth Management, (12.11.2013).
• Worthington, A.C. & Higgs, H. (2003). Art as an Investment: Short and Long-Term Comovements in Major Paintings Markets. Empirical Economics, 28 (4), 649–668. DOI: 10.1007/s00181-003-0152-x.[Crossref]
• Worthington, A.C. & Higgs, H. (2004). Art as an Investment: Risk, Return and Portfolio Diversification in Major Painting Markets. Accounting and Finance, 44, 257–271.[Crossref]

Identifiers

DOI

10.1515/foli-2015-0004