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On the Efficiency of Art Markets. Evidence on return rates from old master paintings to contemporary art

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  • Federico Etro
  • Elena Stepanova

Abstract

Return rates should not depend systematically on past prices or the place of sale in efficient art markets. We provide evidence consistent with such hypothesis from repeated sales of Old Master Paintings, Modern art and Contemporary art auctioned worldwide at Christie's and Sotheby's in 2000-2018. We also control for changes in transaction costs (buyers' premiums and artists' resale rights), characteristics of the sale (evening sales, price guarantees and past bought-ins) and news on the lots (changed attributions, public exhibitions or death of the author) that appear reflected in art returns. We confirm the absence of masterpiece effects in American, Chinese and Ethnic art. Finally, using historical data on prices during Renaissance, Baroque and Neoclassical periods, we find evidence that price changes are independent from initial prices also in the long run.

Suggested Citation

  • Federico Etro & Elena Stepanova, 2019. "On the Efficiency of Art Markets. Evidence on return rates from old master paintings to contemporary art," Working Papers - Economics wp2019_29.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2019_29.rdf
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    Cited by:

    1. Etro, Federico & Marchesi, Silvia & Stepanova, Elena, 2020. "Liberalizing art. Evidence on the Impressionists at the end of the Paris Salon," European Journal of Political Economy, Elsevier, vol. 62(C).
    2. Assaf, Ata & Kristoufek, Ladislav & Demir, Ender & Kumar Mitra, Subrata, 2021. "Market efficiency in the art markets using a combination of long memory, fractal dimension, and approximate entropy measures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 71(C).

    More about this item

    Keywords

    Art market; Mei-Moses index; Market efficiency; Law of one price; Masterpiece effect; Contemporary art;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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