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Are There Bubbles in the Art Market? The Detection of Bubbles when Fair Value is Unobservable

Author

Listed:
  • Nandini Srivastava

    (Christ's College, University of Cambridge)

  • Stephen Satchell

    (Department of Economics, Mathematics & Statistics, Birkbeck
    University of Sydney)

Abstract

The purpose of this paper is to look for bubbles in the Art Market using a structure based on steady state results for TAR models and appropriate definitions of bubbles recently put forward by Knight, Satchell and Srivastava (2011). The usual method for investigating bubbles is to measure prices as deviations from fair value. We assess whether it is meaningful to define a fair value of art and conclude that it is very challenging empirically to implement any definition. We then treat fair value as zero in one instance and unobservable in the other case and in both cases provide evidence of bubbles in the art market.

Suggested Citation

  • Nandini Srivastava & Stephen Satchell, 2012. "Are There Bubbles in the Art Market? The Detection of Bubbles when Fair Value is Unobservable," Birkbeck Working Papers in Economics and Finance 1209, Birkbeck, Department of Economics, Mathematics & Statistics.
    • Handle: RePEc:bbk:bbkefp:1209
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    File URL: https://eprints.bbk.ac.uk/id/eprint/5950
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    More about this item

    Keywords

    Bubbles; Asset prices; Steady state; Non-linear time series; TAR models; Art markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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