Don't let the easy be the enemy of the good. Returns from art investments: What is wrong with it?

Affiliation auteursAffiliation ok
TitreDon't let the easy be the enemy of the good. Returns from art investments: What is wrong with it?
Type de publicationJournal Article
Year of Publication2017
AuteursVecco M, Zanola R
JournalJOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION
Volume140
Pagination120-129
Date PublishedAUG
Type of ArticleArticle
ISSN0167-2681
Mots-clésDutot price index, Hedonic prices, Jevons price index, Non-standard investments, Retransformation
Résumé

Although geometric hedonic price indexes are widely used in the hedonic literature on nonstandard investments, it is well known that portfolios of assets have values that are related to the arithmetic, not geometric, average of prices. This paper explores the implications of the use of arithmetic hedonic price indexes for art investments. Log-linear predictions are retransformed back to the original scale by performing a modified version of the Duan's smearing factor. This procedure is illustrated with an analysis of the returns from 10,459 Surrealist paintings sold worldwide during the pre-crisis period 1990-2007. Findings show significant differences between the arithmetic versus geometric price indexes, while emphasising the caution that should be exercised in interpreting the hedonic index prices of non-standard investments as they are typically computed for academic and business applications. (C) 2017 Elsevier B.V. All rights reserved.

DOI10.1016/j.jebo.2017.05.009