Financial returns and price determinants in the Australian art market 1973-2003

Abstract

In this study, 37,605 paintings by sixty well-known Australian artists sold at auction over the period 1973-2003 are used to construct a hedonic price index. The attributes included in the hedonic regression model include the name and living status of the artist, the size and medium of the painting, and the auction house and year in which the painting was sold. The resulting index indicates that returns on Australian fine-art averaged seven percent in nominal terms over the period with a standard deviation of sixteen percent. As a result, the risk-adjusted return of 0.42 in the Australian art market is only slightly less than the risk-adjusted return of 0.44 in the Australian stock market over the same period. The hedonic regression model also captures the willingness to pay for perceived attributes in the artwork, and this shows that works by McCubbin, Gascoigne, Thomas and Preston and other artists deceased at the time of auction, works executed in oils or acrylic, and those auctioned by Sotheby’s or Christie’s are associated with higher prices.