Working Paper: NBER ID: w26831
Authors: Julien Pnasse; Luc Renneboog; Jos A. Scheinkman
Abstract: The death of an artist constitutes a negative supply shock to his future production; in finance terms, this supply shock reduces the artist's float. Intuition may thus suggest that this supply shock reduces the future auction volume of the artist. However, if collectors have fluctuating heterogeneous beliefs, since they cannot sell short, prices overweigh optimists' beliefs and have a speculative component. If collectors have limited capacity to bear risk, an increase in float may decrease subsequent turnover and prices (Hong et al. 2006). Symmetrically, a negative supply shock leads to an augmentation of prices and turnover. We find strong support for this prediction in the data on art auctions that we examine.
Keywords: art market; premature death; speculation; asset pricing
JEL Codes: G12; G4; Z11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| premature death (I12) | art prices (D44) |
| sudden death (I12) | art prices (D44) |
| premature death (I12) | auction volume (D44) |
| sudden death (I12) | auction volume (D44) |