Christophe Spaenjers

Art and Money

This paper investigates the impact of equity markets and top incomes on art prices. Using a newly constructed art market index, we demonstrate that equity market returns have had a significant impact on the price level in the art market over the last two centuries. We also find evidence that an increase in income inequality may lead to higher prices for art. Finally, the results of Johansens cointegration tests strongly suggest the existence of a long-run relation between top incomes and art prices.

Subjective Life Horizon and Portfolio Choice

Using data from a U.S. household survey, we examine the empirical relation between subjective life horizon (i.e., the self-reported expectation of remaining life span) and portfolio choice. We find that equity portfolio shares are higher for investors with longer horizons, controlling for gender-specific age effects, socio-economic characteristics, health, and optimism. Our result is robust to accounting for the endogeneity of equity market participation or instrumenting subjective life horizon with parental survival. Finally, we show that the effect of a shortening horizon on portfolio allocation is stronger for households without bequest motives.

Unique Durable Assets

We present an infinite-horizon model of endogenous trading in the art auction market. Agents make purchase and sale decisions based on the relative magnitude of their private use value in each period. Our model generates endogenous cross-sectional and time-series patterns in investment outcomes. Average returns and buy-in probabilities are negatively correlated with the time between purchase and resale (attempt). Idiosyncratic risk does not converge to zero as the holding period shrinks. Prices and auction volume increase during expansions. Our model finds empirical support in auction data and has implications for selection biases in observed prices and transaction-based price indexes.We present a model of trading in the art auction market. Agents make purchase and sale decisions based on the relative magnitude of their private use value. This generates an endogenous negative relation between holding periods and financial returns. In economic expansions consignment volume goes up, while reserve prices become less restrictive. Our model of endogenous trading finds empirical support in historical art transaction data. Finally, we show that transaction-based price indexes provide biased estimates of art’s volatility and covariance with the economy, and can be expected to suffer from index revision problems.

The Investment Performance of Art and Other Collectibles

We assess the long-term financial returns from high-quality collectible real assets, and review the unique risks that are associated with such investments. Over the period 1900-2012, art, stamps, and musical instruments (violins) have appreciated at an average annual rate of 6.4%-6.9% in nominal terms, or 2.4%-2.8% in real terms. Despite the similarity in long-term returns, short-term trends can vary substantially across these different types of emotional assets. Collectibles have enjoyed higher average returns than government bonds, bills, and gold. However, it is important to recognize the quantitative importance of transaction costs in collectibles markets. In addition, price volatility is larger than is suggested by conventional measures of risk, and these assets are also exposed to fluctuating tastes and potential frauds. Yet, despite the large costs and many pitfalls, investment in emotional assets can pay off, because of the non-financial yield they provide.

Investment Returns and Economic Fundamentals in International Art Markets

Abstract: Works of art are neither easily tradable across borders, nor evaluated according to globally identical standards. We examine geographical segmentation and its effects on price formation and returns in the international art auction market. We find (i) a close connection between the country of sale and the type (e.g., nationality) of artworks sold; (ii) substantial international variation in average returns to art investments over the period 1971-2007; (iii) an impact of both global and local GDP growth and equity returns on national art market returns. Local fundamentals have not lost importance over time, despite increased economic integration (especially between the EU countries). Yet, country-specific economic factors matter less in determining the auction outcomes for high-end art. Our findings suggest the continuing importance of international demand differences in shaping the global art market, at least outside the top segment.

A Model of Trading in the Art Market

We present an infinite-horizon model of endogenous trading in the art auction market. Agents make purchase and sale decisions based on the relative magnitude of their private use value in each period. Our model generates endogenous cross-sectional and time-series patterns in investment outcomes. Average returns and buy-in probabilities are negatively correlated with the time between purchase and resale (attempt). Idiosyncratic risk does not converge to zero as the holding period shrinks. Prices and auction volume increase during expansions. Our model finds empirical support in auction data and has implications for selection biases in observed prices and transaction-based price indexes.We present a model of trading in the art auction market. Agents make purchase and sale decisions based on the relative magnitude of their private use value. This generates an endogenous negative relation between holding periods and financial returns. In economic expansions consignment volume goes up, while reserve prices become less restrictive. Our model of endogenous trading finds empirical support in historical art transaction data. Finally, we show that transaction-based price indexes provide biased estimates of art’s volatility and covariance with the economy, and can be expected to suffer from index revision problems.

A Model of Trading and Price Indexes in the Art Market

We present an infinite-horizon model of endogenous trading in the art auction market. Agents make purchase and sale decisions based on the relative magnitude of their private use value in each period. Our model generates endogenous cross-sectional and time-series patterns in investment outcomes. Average returns and buy-in probabilities are negatively correlated with the time between purchase and resale (attempt). Idiosyncratic risk does not converge to zero as the holding period shrinks. Prices and auction volume increase during expansions. Our model finds empirical support in auction data and has implications for selection biases in observed prices and transaction-based price indexes.We present a model of trading in the art auction market. Agents make purchase and sale decisions based on the relative magnitude of their private use value. This generates an endogenous negative relation between holding periods and financial returns. In economic expansions consignment volume goes up, while reserve prices become less restrictive. Our model of endogenous trading finds empirical support in historical art transaction data. Finally, we show that transaction-based price indexes provide biased estimates of art’s volatility and covariance with the economy, and can be expected to suffer from index revision problems.

Art as an Asset and Keynes the Collector

If art indexes are exposed to transaction-channel selectivity, suffer from survivorship bias, or weight individual assets inappropriately, they may be unrepresentative of art investors’ performance. To investigate these issues, we study an actual invested portfolio — the art collection of economist John Maynard Keynes — using valuations that span up to 96 years. We document substantial long-term real returns and show that auction purchases were followed by significantly higher initial returns than primary market acquisitions. We argue that, because of the concentration of art portfolios, indexes based on auction prices for established artists can successfully capture the value-weighted average returns realized by art investors buying in the secondary market. Positive skewness in returns can nevertheless cause most investors to underperform the asset class.