Helen Higgs

Australian Art Market Prices during the Global Financial Crisis and Two Earlier Decades

This study constructs a quarterly hedonic price index using 64,203 artworks, by seventy-one well-known modern and contemporary Australian artists, sold at auction houses over the period 1986-2009. The hedonic regression model includes characteristics such as name and living status of the artist, the size and medium of the painting, and the auction house, quarter and year in which the painting was sold. The resulting index indicates that returns on Australian fine-art averaged one percent in nominal terms over the period from quarter one 1986 to quarter four 2009 with a standard deviation of seventeen percent. During the global financial crisis spanning quarter one 2008 and quarter four 2009, the average art returns declined in nominal terms by close to six percent with a standard deviation of twenty-one percent. This study also shows that over the entire period the art market only marginally underperformed the stock and housing markets. The low correlations between these markets suggest the benefits of portfolio diversification.

Discouraged finance seekers: An analysis of Australian small and medium-sized enterprises

This article investigates the effects of firm-level factors, including size, profitability, number of employees, business strategy and life-cycle, on finance seeking (debt and/or equity) by Australian small and medium-sized enterprises (SMEs). The study identifies firms seeking (or not seeking) finance and those who successfully (or unsuccessfully) acquired finance over a three-year period. Taking advantage of the longitudinal nature of the the data, the study finds that experience as a discouraged finance seeker significantly affects future behaviours. This has important policy implications: the observed demand for finance by SMEs and the capital rationing implied may understate the actual level as potential finance seekers anticipate rejection. The study also finds that SMEs become relatively more discouraged in seeking debt than equity finance.

Market Risk in Demutualized Self-Listed Stock Exchanges: An International Analysis of Selected Time-Varying Betas

Abstractn This article examines market risk in four demutualized and self-listed stock exchanges: the Australian Stock Exchange, the Deutsche Börse, the London Stock Exchange and the Singapore Stock Exchange. Daily company and the Morgan Stanley Capital International (MSCI) Index returns provide the respective asset and market portfolio data. A bivariate GARCH model is used to estimate time-varying betas for each exchange from listing until 7 June 2005. While the results indicate significant beta volatility, unit root tests show the betas to be mean-reverting. These findings are used to suggest that despite concerns that demutualized and self-listed exchanges entail new market risks that merit regulatory intervention, the betas of the exchange companies have not changed significantly since listing. However, market risk does vary considerable across the exchanges, with mean time-varying betas of 0.56 for the Deutsche Börse, 0.66 for the London Stock Exchange, 0.78 for the Singapore Stock Exchange, and 0.95 for the Australian Stock Exchange.

Efficiency in the Australian Stock Market, 1875-2006: A Note on Extreme Long-Run Random Walk Behaviour

This article examines the weak-form market efficiency of the Australian stock market. Daily returns from 6 January 1958 to 12 April 2006 and monthly returns from February 1875 to December 2005 are examined for random walks using serial correlation coefficient and runs tests, augmented Dickey–Fuller, Phillips–Perron and Kwiatkowski, Phillips, Schmidt and Shin unit root tests and multiple variance ratio tests. The serial correlation tests indicate inefficiency in daily returns and borderline efficiency in monthly returns, while the runs tests conclude that both series are weak form inefficient. The unit root tests suggest weak-form inefficiency in both return series. The results of the more stringent and least restrictive variance ratio tests indicate that the monthly returns series is characterized by a homoscedastic random walk, but the daily series violates weak-form efficiency because of the short-term autocorrelation in returns.

Time-varying dependency in European energy markets: an analysis of Nord Pool, European Energy Exchange and Intercontinental Exchange energy commodities

In this paper we investigate the extent to which the price of Nordic electricity derivatives correlates with European Energy Exchange (EEX) and Intercontinental Exchange (ICE) electricity contracts. We also include their price correlation with ICE gas, Brent crude oil, coal and carbon emission contracts. Using multivariate generalized autoregressive conditional heteroskedasticity models, we find significant time-varying relationships between all of the energy commodities included in the analysis, with the exception of oil. This suggests that pricing models based on constant correlation may be misleading. We also find that Nordic energy futures exhibit the strongest relationship with German electricity futures contracts traded in the EEX, and there appears to be a stronger relationship between longer maturity contracts in all markets.

Australian fine art as an alternative investment

Purpose - The purpose of this paper is to examine the investment characteristics of works by leading Australian artists. Design/methodology/approach - About 35,805 paintings by 45 leading Australian artists sold at auction are used to construct individual hedonic price indices. The attributes included in each artists hedonic regression model include the size and medium of the painting and the auction house and year sold. Findings - The indexes show that average annual returns across all artists range between 4 and 15 per cent with a mean of 8 per cent, with the highest returns for works by Brett Whiteley, Jeffrey Smart, Cecil Brack and Margaret Olley. Risk-adjusted returns are generally lower, with reward-to-volatility and reward-to-variability ratios averaging 1.5 and 5.8 per cent, respectively. The portfolio Research limitations/implications - The returns on a buy-and-hold strategy in the Australian art market are at least comparable to the Australian stock market. While total risk is greater, the very low market risk found in almost all artistic portfolios is suggestive of the possible benefits of portfolio diversification through art investment. Moreover, a number of artists works offer very superior market and non-market risk-adjusted performance. Originality/value - This is the first Australian study to construct measures of risk, return,

The impact of generation mix on Australian wholesale electricity prices

ABSTRACT This paper examines the impact of generation mix, encompassing fossil fuels (black and brown coal and natural gas) and renewables (hydropower and wind power) on daily spot electricity prices across the five regional electricity markets in the Australian National Electricity Market (NEM) from January 2006 to June 2012. The objective is to gain insights into the emergent effect of government policy and industry developments regarding the choice of generation on wholesale electricity prices. Using least squares and quantile regressions, it is found that the changing generation mix used for producing electricity exerts a strong influence on wholesale prices. This is especially the case with prices expected to increase markedly with the increasing utilization of gas-fired generation used to support the intermittent and variable production from renewables and from the policy-driven use of renewables wind power associated with the current renewable energy target and carbon taxation in Australia.

Family ownership, altruism and agency costs in Australian small- and medium-sized enterprises

Given the continuing uncertainty about whether family firms enjoy lower agency costs, this article hypothesizes that a combination of the effects of family ownership, altruism and self-control is instead at play. To begin with, family ownership can indeed reduce agency costs through better aligning the interests of owners and managers. This is a ‘determining’ effect in that it independently mitigates one source of agency problems. However, altruism combined with self-control problems arising from the highly concentrated ownership often found in family firms can also increase agency costs. This is an ‘embedding’ effect as it is rooted in the personal relationships within the family firm. Using the Business Longitudinal Database compiled by the Australian Bureau of Statistics on small- and medium-sized enterprises (SMEs), we find that for larger SMEs (those with 20–200 employees), the gains in lower agency costs arising from family ownership are almost completely offset by the losses from altruism and the lack of self-control.

The Auction Market for Artworks and Their Physical Dimensions Including the Golden Ratio: Australia: 1986 to 2009

Within a hedonic pricing model the preferences of art purchasers for the measurable dimensions of artworks are investigated. The golden ratio’ hypothesis is tested for the first time in a market situation, with negative results. The impact on the prices of works by artists who have won the Archibald portraiture prize is estimated. This indicates that Australian art purchasers are not fully informed. In addition an unsuspected relationship between artwork dimensions and Archibald prize winners was found. Artists’ choices of the dimensions of their works are also considered. Overall, the results suggest that previous art price models are incompletely specified.

Artwork characteristics and prices in the New Zealand secondary art market, 1988–2011

ABSTRACT Using hedonic pricing, prices realised at auction are estimated against artwork characteristics for New Zealand for over 27,000 artworks by over 1600 artists. The data-set is larger and more representative of an art market, especially for lower prices, than all other art price studies. The number of works by each artist auctioned over the entire period is a measure of each artists market presence. Sample selection bias created by unsold artworks is corrected using the Heckit method. Estimation results including the creation of the first New Zealand art price index are presented and interpreted.