Monday, April 9, 2018

An Art Market Return Index

Rare and collectible goods, from fine art to fine wine, have many interesting and special aspects. Some are shared and some are idiosyncratic.

From the vantage point of alternative investments (among other things), it would be useful to have high-frequency indices for those asset markets, just as we do for traditional "financial" asset markets like equities.

Along those lines, in "Monthly Art Market Returns" Bocart, Ghysels, and Hafner develop a high-frequency measurement approach, despite the fact that art sales generally occur very infrequently. Effectively they develop a mixed-frequency 
repeat-sales model, which captures the correlation between art prices and other liquid asset prices that are observed much more frequently. They use the model to extract a monthly art market return index, as well as sub-indices for contemporary art, impressionist art, etc.

Quite fascinating and refreshingly novel.