On the rate of return in the art market: Survey and evaluation

 What are the differences between an art- and a financial investments and what determines the rate of profits of these? How to measure the psychic benefits from investments in art and which are the determinants?

The rate of returns on investments in paintings is lower than for investments in financial assets, the psychic returns from owning and viewing the painting makes art more attractive. There is a huge importance of behavioural anomalies in the art deals. It has been shown that there are a lot of irrationalities such as January-, holiday-effects in the art markets which are very common. For a market to be efficient, it is more preferable to have only a few persons arbitraging. The fact that the market is only partly open, short selling is quiet impossible and there is a dependence of the art prices on political intervention makes the art market more likely to be efficient. Art can be seen as an investment good, but also as a consumption good. The most important determinants which make the difference between these two categories are risk, costs and taxes. The return from owning art is not only an expected price rise but also a psychic return. The psychic return can be measured by the willingness from the buyers to rent an art work, or the willingness to visit a museum where it is shown.

matthias van der schueren

Bruno S. Frey, Reiner Eichenberger, "http://www.sciencedirect.com/science/article/pii/0014292194000599"