However, if you calculate art market indexes using sophisticated methods, including high numbers of art pieces traded publicly and privately, you will get reliable art performance information. Thus, the return rates and risks of the art investments are comparable to other financial and commodity indexes. Hedonic art market indexes are a valuable instrument in assessing the true performance of art works.

We have calculated such hedonic indexes for American Abstract Expressionists and chosen two single artists and computed their performance separately.

The result for the expressionists and the two artists – Joan Mitchell and Mark Rothko – are quite compelling and seem to be in line with the record prices. The art category shows a geometric average net return rate of 8.7%, the two artists have achieved 10,3% and 12.3% for the past 14 years – Gold is at 10.4% but less risky.

The correlations of art in this example are close to zero with the S&P500 and at a positive 0.3 with Gold. In addition to a good performance, the sample observed can also be a good diversifier. To sum it up, art acquisitions contain often emotional aspects leading to highly volatile and unpredictable prices. Nevertheless, thorough art market analysis can deliver relevant information to art investors and thus, minimize risk.

Art Market Analyses publishes financial performance art index data on the global art market for professional art investments, art appraisals, art valuations, and offers individual art advisory services.

For more information please visit: http://artmarketanalyses.com/

The information on art objects provided by auction houses are an important source of information to market participants. They include the technique, support, provenance, condition and the like. The sales prices published after the event increase transparency. We should not enter into the discussion of what should be the “right” price of an art object – ultimately it’s the one somebody has paid. The realized price might be extremely exaggerated due to bidder fights or collusion.

From an art market performance measurement point of view the interesting question is how good are pre-sales estimates of auction houses? Is it useful to include them in hedonic regression models because they are valuable price determinants? Valuable means that they can contribute to explain the relation between the (hedonic) characteristics of an art object – like the name of the artist, the size, the subject matter, place of sale etc. – and the resulting auction price.

There is a repeated sales study which investigates that question for the case of Italian paintings. The analysis refers to the price estimates of 1,975 Italian paintings which were sold in auctions all over the world at least twice from 1985 to 2006. The assumption is, that the higher the bandwidth of the estimated range, the higher the uncertainty in predicting the resulting sale price (hammer price). The accuracy of the pre-sales estimates is measured through firstly, the frequency of times the hammer price falls into the pre-sale estimate range, and secondly, the distance between the hammer price and the average between the low and high estimates.

The researchers found that for art investors, pre-sale estimates are not good predictors of realized hammer prices. Furthermore, major auction houses (i.e. Sotheby’s and Christie’s) do not exhibit any superior accuracy in predicting prices. However, the informational content of pre-sale estimates seems to be stronger when Italian paintings are auctioned in Italy. In addition, investors can rely more confidently on estimates set according to previous (although recent) prices, thus revealing some “anchoring effect”.

To put it in a nutshell, art investors should look for similar pieces of art works sold recently. Those results – if available at all – seem to be better predictors of future prices than auction house pre-sales estimates. As for hedonic art market indexes, pre-sales estimates are usually not to be included as variables in a model. However, for some artists, it can make sense to add preceding performance numbers, since they can have a considerable impact on future prices.

Art Market Analyses publishes financial performance art index data on the global art market for professional art investments, art appraisals, art valuations, and offers individual art advisory services.

Source:
Investing in Art: the Informational Content of Italian Painting Pre-Sale Estimates, 2008

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Your personal interest in art

This may seem like a general truth, but too often novices enter the art market without a passion or interest for the medium. The result is that they make poor art investment choices and end up with pieces they don’t even like.

Your knowledge on art

If you have ever taken an art history course – then good for you. But bear in mind that your knowledge does not begin and end there. The art world is in many ways like any other market, it also lives on what’s happening today and it hunts for what will happen tomorrow.

One way to find out what kind of art lover you are is by visiting galleries and art museums. Museums will give you an indication of the field; galleries will tell you what’s going on in the world of (contemporary) art right now and provide an idea on art price levels.

Another efficient approach is to visit public auction sessions. It is one of the best methods to get a good overview on art objects traded and the prices and fees involved. You can inspect the art pieces before the sale and acquire some knowledge about art styles and techniques by studying the auction catalogue.

Your art exposure

When it comes to art, or any money investment for that matter, it’s common to think that you know what you’re doing. After all, you see the success of some art professionals and you think, why not me? Art, like property, has a lot to do with business. Experience plays an important role in art investment processes. While a first time buyer isn’t likely to understand how and why the market swings on taste, he isn’t necessarily at a disadvantage.

Perhaps one of the best ways to insure your private art acquisition is by purchasing something you also like and consider art advisory. Art prices rise and fall, so if you buy something that you like, you’ll be able to live with it through the lean years.

Art Market Analyses publishes financial performance art index data on the global art market for professional art investments, art appraisals, art valuations, and offers individual art advisory services.

On the other hand, if you play your cards right, you stand a good chance of getting high returns. Indeed, it’s a high stakes investment game where the risks and the returns are high. The good news is that there are some ways to put the odds of a getting a successful art investment in your favor.

Invest for the Long Term

Well-selected contemporary art pieces can easily become more valuable after just 5 years. In contrast, multiple studies show that investment opportunities in art markets of older pieces are more favorable than investing in financial markets only, when you hold them for at least 10 years or even more.

Do Art Market Research

If you don’t have enough knowledge of contemporary art markets, make sure you do your homework before making any investments. Information is key to finding success in the art market. Read as much as you can and talk to people from the inside. Assess art magazines and recent art market research reports, visit art exhibits, art galleries and have personal talks with the artists themselves – this is important if you’re planning to buy their work.

Keep to the Middle Ground

Sticking to the middle ground reduces your risk of making mistakes with your art investments. The middle ground is mostly made up of contemporary art pieces that cost up to around USD 30K. The bulk of the interest in art investments typically focuses on the middle ground of the market. Investors, at least those who want to play it smart, focus on pieces that are neither too famous, nor too contemporary wherein their value and future performance is questionable.

Pieces that are famous often raise complex issues of ownership, forgery and heritage, which can all potentially take too much of your time and money. Pieces that are too contemporary on the other hand, have yet to make the rounds at major shows and auction houses, so issues of their deemed value may arise.

Art Market Analyses publishes financial performance art index data on the global art market for professional art investments, art appraisals, art valuations, and offers individual art advisory services.

For more information, please visit: https://artmarketanalyses.com

Do your Homework – Art aficionados have one important thing in common when making an investment in art – they do their research first. When it comes to financial investing in art, it’s not enough to select pieces that match your taste, since you want to make sure that its value appreciates over time. It’s important to remember that art investments are somewhat unstable investments; the value of a piece can fluctuate on any given when market trends or fashion changes. Aside from the mercurial nature of the art market, you also need to take note of other factors when investing in artworks like e.g.: the provenance, condition, art historical importance and rarity of that particular piece you are interested in, and so forth.

Check the Artist’s Background – Much emphasis is given to the style and beauty of an art piece, but don’t forget a key component in art investing: the artist’s worth and reputation. The artist’s value will matter a great deal in ascertaining how valuable an art piece is, or not. When buying art, the last thing you want is to spend too much on one piece because of the hype it’s getting. That said, make sure you check some artist factors first, such as the price of the pieces the artist previously sold, artist performance indexes, industry opinion and reviews of the artist and his, or her, work, and who represents the artist in the industry.

Be Wary of Scams – It takes a certain cunning, a business flair if you will, for to be successful in art investing. This is crucial if you want to stay two steps ahead of the latest scams in the art industry. Forgeries and fakes for instance, are far more common than you think, and it’s not just the art pieces themselves that are affected. Everything from signatures, titles and forged paperwork can destroy your investment and render it worthless.

Art Market Analyses publishes financial performance art index data on the global art market for professional art investments, art appraisals, art valuations, and offers individual art advisory services.

For more information, please visit: https://artmarketanalyses.com/

Make Verifications
For instance, although the internet has made it easier than ever to buy artworks, it has also raised new issues that need to be taken into account. For instance, online sellers normally indicate a lot of information when describing a piece of art. The only problem is how to verify that information. Herein lies the importance of asking as many questions as you can to check the authenticity of a piece. Sellers can be unreliable, since they’re likely to have typed in the information themselves. Your best bet is to approach an independent art consultation to get expert advice with specific art pieces for sale. As a rule of thumb, it’s best to buy your art pieces from one source, and have it examined, e.g. with an art appraisal, by another.

Take Down Everything in Writing
Taking down all information you can about the artwork transaction is a basic yet effective method of protecting yourself. Note down everything in writing, from the technical information about the art piece, provenance, current seller, price and return/exchange policies. The traditional method of having a signed document legally notarized will protect you, particularly when a need to go to court arises. Make a point to get as much information as you can about previous sellers – the provenance. This will be useful in the future, if you should consider reselling the artwork.

Discuss Return Policies Thoroughly
You and the seller must have a clear discussion about the possibility of returning art pieces. Oral agreements won’t suffice, so make sure you take down all relevant information in writing. Better yet, have a certificate of authenticity signed by the artist or seller. An original copy must be furnished to ensure the transaction is 100% ironclad.

Art Market Analyses publishes financial performance art index data on the global art market for professional art investments, art appraisals, art valuations, and offers individual art advisory services.

For more information, please visit: https://artmarketanalyses.com/

Who is investing these amounts in the art market and why? Barclays Wealth has released a report on treasure investment trends based on a global survey of 2,000 high-net-worth individuals that includes a number of observations about art collecting. Fifty per cent of respondents said they now own art, making it the second most popular treasure after jewelry. However, while art is more popular with those aged 55 and over, those under 45 prefer cars, wine, precious metals and jewelry. Although art has been increasingly promoted as an investment, and protection against inflation, only 10 % of respondents said that they bought art solely as an investment. Over a third said they bought art and cars as status symbols, and just under a third said they bought art to pass on to their children. On average, owners would consider selling only if the value of the art increased by at least 62 % in the year of acquisition.

Major artworks get the highest profile and art appraisals, but there is increased interest at all levels of the market. For example, Christie’s South Kensington saleroom, which offers works of art from under £1,000, built on two consecutive years of record sales, recording its highest ever total for a corresponding period. The message from all of the art advisors when it comes to investing in art is clear – you need to buy something you like and not concentrate on its potential future value.

Art Market Analyses publishes financial performance art index data on the global art market for professional art investments, art appraisals, art valuations, and offers individual art advisory services.

Source: Is Art a Viable Alternative Investment?, Telegraph, 2012

For more information please read original publication: http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/9423716/Is-art-a-viable-alternative-investment.html

People sometimes may feel some resentment when they hear the words investments in art. Is art investing appropriate at all? Especially where money is the reason for buying a work, rather than a criticism made by it? The purpose of art is often to critically scrutinize a society that largely is driven by money, and commercialization is therefore generally avoided.

The recent auction results reflect a booming art market. Several new auction records were set in the preceding years. On May 4, 2010, for example, the Picasso painting “Nude, Green Leaves and Bust” was sold at Christie’s for the sum of 106.5 million U.S. dollars, making it the most expensive piece of art ever sold at auction. However, this was not an isolated case as just three months earlier the Giacometti sculpture “L’homme qui marche” was auctioned for 104.3 million U.S. dollars.

We anticipate that demand for art will continue to increase in future as new wealth has been established, in particular, in the emerging countries. Investors from China, Russia, India and the Arab world are amongst the most powerful buyer groups at leading art auctions. The Credit Suisse Global Wealth Report indicates just how significant the potential of these buyers is. Although China makes up 20 percent of the world population, it only has three percent of all dollar millionaires worldwide.

It is not just in terms of buyers that the influence of the emerging markets has increased, but also as an art market itself. China has now become the leading art market. According to Thierry Ehrmann, the founder of the website artprice.com, China now generates 33 percent of global sales revenues in the fine art category compared to 30 percent in the USA and 19 percent in the UK.

Art investments can be made in various ways. The most common is the direct purchase of art. However, this requires extensive knowledge of the artists, their works, and sound art appraisals and valuations before acquisitions are executed. Art funds may therefore be better suited to investors with less knowledge. These contain a basket of art works and thus offer a degree of diversification. Another option is investing in companies that operate in the art market. However, the company-specific risk, which often does not relate directly to the art market, has to be taken into account here.

Finally, art is a completely justifiable form of investment and offers various attractive features. Art is nevertheless deemed a passion investment where emotional value is a key factor.

Art Market Analyses publishes financial performance art index data on the global art market for professional art investments, art appraisals, art valuations, and offers individual art advisory services.

Source: Credit Suisse Private Banking, Economy

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