Working Paper: CEPR ID: DP14357
Authors: David Chambers; Elroy Dimson; Christophe Spaenjers
Abstract: The risk-return characteristics of art as an asset have been previously studied through aggregate price indexes. By contrast, we examine the long-run buy-and-hold performance of an actual portfolio, namely, the collection of John Maynard Keynes. We find that its performance has substantially exceeded existing estimates of art market returns. Our analysis of the collection identifies general attributes of art portfolios crucial in explaining why investor returns can substantially diverge from market returns: transaction-specific risk, buyer heterogeneity, return skewness, and portfolio concentration. Furthermore, our findings highlight the limitations of art price indexes as a guide to asset allocation or performance benchmarking.
Keywords: Art; Investment; Keynes; Portfolio Performance
JEL Codes: B26; C43; G11; G12; G14; Z11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial purchase prices (G19) | overall portfolio returns (G11) |
| subsequent appreciation of the artworks (Z11) | overall portfolio returns (G11) |
| market valuations (G19) | overall portfolio returns (G11) |
| transaction-specific risk (L14) | individual artwork returns (Z11) |
| buyer heterogeneity (D11) | acquisition prices (D44) |
| acquisition prices (D44) | portfolio performance (G11) |
| positive skewness of artwork returns (C46) | overall portfolio returns (G11) |
| concentration of the collection (D30) | overall return (G19) |