Modelling South African Art Prices: An analysis of post-2000 price behaviour

The South African art market has grown markedly over the last two decades, and yet there is currently very little research on this market. This paper aims to make three contributions to the literature. The first is to estimate new quality-adjusted price indices for South African art since the turn of the millennium. The paper estimates central tendency indices, as a baseline for comparisons, as well as various hedonic indices that control for quality-mix or compositional changes over time. The second contribution is to estimate alternative art price indices by applying a simple hybrid repeat sales method to art prices. This approach addresses the problem of lack of repeat sales observations in the data and to some extent the potential omitted variable bias inherent in the hedonic method. This has not been attempted for art prices in any country. The hedonic and hybrid repeat sales indices seem to point to the same general trend in South African art prices. According to these measures, the South African art market experienced a huge price increase in the run-up to the Great Recession. The third contribution of the paper is to study the art price indices for evidence of a bubble in the South African art market over the period. The hedonic and hybrid repeat sales indices seem to point to consistent evidence of mildly explosive price behaviour in the run-up to the Great Recession.