Artistic value: A financial tool for the art market. 2023. Arturo Cifuentes and Ventura Charlin. Columbia University Press.
“Sorry, but there is no magic formula for predicting which artists will be featured next year, or whether Andy Warhol’s Marilyn’s will top the S&P 500 in the next five years.”
so please write Arturo Cifuentes and Ventura Charlin of The Value of Art: A Financial Tool for the Art Market. So what can the reader hope to achieve with the financial tools for navigating the art market promised in the book’s subtitle? Answer: Practically achievable goals, such as determining how the market will arrive at the value of various works by a particular artist, and estimating the earnings of an artist’s work as a whole. The authors argue that there is no more reliable way to predict the short-term price performance of paintings than common stocks.
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The quantitative method described by Cifuentes and Charlin, fellows of CLAPES-UC (Catholic University of Chile) and also living in New York, yielded the following interesting findings referring to the work of Pierre-Auguste Renoir.
- For artists, femme after le ban If it was 10% larger, the 1985 auction price of $2,865,892 would have been 6.5% higher. Auction prices for a painter’s work usually increase in size. But beyond a certain square foot, very large works can only be displayed in museums and palaces, driving prices down and limiting the number of potential bidders.
- All else being equal, the inclusion of more than one person in a composition has a positive impact on Renoir’s price, while the inclusion of nudes and landscapes lowers the price per square centimeter (cm).2) — a “crude but useful” indicator used throughout this document.
- When Renoir landscapes are framed vertically, the price per centimeter goes up.2 Better than the horizontal frame (ironically also called “landscape”) format.
- A Renoir is likely to fetch a higher price in New York than elsewhere. The authors point out that this finding violates the law of one price and suggests inefficiencies in the Renoir market.
Returns are often more difficult to estimate for works of art, which typically change ownership frequently, than for securities for which daily trading prices are available. Quantifying the diversification effect of art within a portfolio consisting primarily of securities and commodities presents an equally daunting challenge. Cifuentes and Charrin use highly sophisticated mathematics to address this difficulty. They acknowledge that terms such as “heteroscedasticity consistent covariance matrix estimation” are outside the knowledge base of many readers, but they provide an “Appendix for Poets” that explains the concepts underlying their methodology.
value of art We also deal with the risk of art-secured loans and lowest price guarantees at auctions. Separately, Cifuentes and Charlin report that artificial intelligence (AI) has not outperformed experienced appraisers in predicting auction prices. But they see the potential of AI to help museums and scholars classify works of art by style and movement. Finally, the authors show how the quantitative method can also be applied to other specific collectibles: violins, wine, and classic cars.
I found value of art Enlightening and fascinating, but I have one question. The author writes: . . This book is not for you. ’ It’s okay to bias your purchases towards aesthetic preferences if that’s what individuals want. However, such behavior is not appropriate as a fiduciary. Asset managers tasked with investing in works of art on behalf of their clients will benefit from reading this book as an aid to making objective decisions with the sole objective of maximizing risk-adjusted returns. A manager is no more at a disadvantage than a trading partner who has never seen a bushel of wheat or a barrel of oil.
Moreover, even investment professionals who do not plan to engage in art or collectibles will benefit from addressing Cifuentes and Charlin’s criticisms of traditional securities analysis. For example, they point out that the standard calculation of the diversification effect is dubious given the pronounced time dependence of the correlation, “a dirty secret in financial analysis that most financial textbooks and nearly all scholars are reluctant to admit or even discuss.” The Arts sector reports earnings correlations between the Old Masters and the Case-Shiller Home Price Index range from -20.54% to +27.98%, depending on which period of his seven years from 2004 to 2020 is chosen. Asset allocators dealing with more mainstream asset classes may be surprised by the volatility of the correlations underlying their decisions.
The authors also reject the widespread practice of equating the standard deviation of risk and return when calculating the risk-reward ratio as flawed. They argue that such exercises should instead incorporate value-at-risk, defined as the maximum possible loss over a period of time. X at the trust level y. In addition, Cifuentes and Charlin’s standard report pays insufficient attention to real returns rather than nominal returns, resulting in reports on historical asset performance.
Just 241 pages of text cannot adequately assess all aspects of art investment. The authors responsibly state that a thorough discussion of the specific topics they touch on is beyond the scope of this book. But one thing that might be more notable is the potential disappointment that could befall investors who buy contemporary artists’ work with Warren Buffett’s favorite holding period (forever) in mind. The evolution of prices over the decades, in which the author details the works of various artists, is not always representative.
For example, in 2015 analyst and author Zac Bissonnette recalled that Jean-Louis-Ernest Meissonnier (1815-1891) was described by fellow artist Eugène Delacroix as “the undisputed master of our time.” . . . Of all of us, he’s definitely the most likely survivor,” says James Grant in “Larry Fink, Beware” (May 15, 2015). subsidy interest rate watchers.Meissonnier painting freeland The painting’s current home, the Metropolitan Museum of Art, said it sold for “then astronomical” in 1876 at $60,000 ($1.7 million in 2023 dollars). Sadly, Bissonnette said, “the market has devalued one of the most admired artists of the 19th century and his work has become worthless.” Un cuirassier a Cheval It sold for a measly $1,075.50 in 2012. With the rise of modernism, tastemakers concluded that his historically accurate work was pedantic and that the nationalism he exhibited was problematic.
But overall value of art For those new to art as a means of building wealth, this is essential. The techniques and insights will be new even to many seasoned art investors. Readers will have to decide for themselves what appeals to them artistically, but this book fills the stubborn economic part of the picture.
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