This question has been increasingly raised over the past years. Is investing in art a good decision? Art is increasingly seen as a viable financial investment option. It is therefore important to study art as a financial asset, talking about performances, returns, risk and portfolio diversification is necessary. This article summarizes the work of Rachel A. J. Campbell, and her paper “Art as a financial investment”.
The performance of the fine art market:
The performance analysis is based on the data produced by AMR (Art Market Research). The fine art market is divided in four sectors: Old Masters, European Impressionists, Modern and Contemporary.
The Old Masters index is composed of European artist until the 18th century. The index includes over 25 000 sales.
The European Impressionist art index regroups a small number of 25 artists, from Manet to Matisse. It includes European Impressionists and post-Impressionists. The number of sales included in the index is around 22 000.
The Modern art index is composed of a higher number of artists from Kadinsky to Bacon, over 63 000 transaction are included.
Finally, the Contemporary art index, with data starting in 1985 is newer. It includes over 21 000 sales from artists such as Freud and Hirst for example.
The indices give us a general indication of movements of prices in the art sector. The research indicates that the fine art market is outperformed by one sector: Contemporary art. Which is the one of the most volatile and speculative. The lowest performer is the Impressionist and post-Impressionist sector.
Risk and Returns in the fine art market:
To determine the risk and returns of the fine art market, globally and per sector, 25 years of data of monthly returns have been used. The general art index has given 6.5% average annual return. Per sector: 5.5% for Old Masters, 6.3% for European Impressionists, 7.5% for Modern and a high 9% for Contemporary.
The findings of the author is that the European Impressionist art market has been the most volatile, with an average standard deviation of more than 15%. Old Masters, being, unsurprisingly, the least volatile with an average annual standard deviation of 7%.
In Finance risk is generally measured by standard deviation. For the fine art market, the same approach was taken by the author. For a unit of risk, the Modern and Contemporary art sectors offer the highest returns.
Conclusion:
There has been extensive research on the subject, wealth managers are now increasingly diversifying their portfolios with art, so the answer to the original question is yes. Art can be considered, in terms of fact, figures and returns, as a financial investment. But there is one major difference compared to the more classical assets. Indeed, in finance there is always one thumb rule to remember: emotions should not influence your investment decisions. But the question them becomes: can the same be said for art? Is investing in art without emotions possible?
The performance of the fine art market:
The performance analysis is based on the data produced by AMR (Art Market Research). The fine art market is divided in four sectors: Old Masters, European Impressionists, Modern and Contemporary.
The Old Masters index is composed of European artist until the 18th century. The index includes over 25 000 sales.
The European Impressionist art index regroups a small number of 25 artists, from Manet to Matisse. It includes European Impressionists and post-Impressionists. The number of sales included in the index is around 22 000.
The Modern art index is composed of a higher number of artists from Kadinsky to Bacon, over 63 000 transaction are included.
Finally, the Contemporary art index, with data starting in 1985 is newer. It includes over 21 000 sales from artists such as Freud and Hirst for example.
The indices give us a general indication of movements of prices in the art sector. The research indicates that the fine art market is outperformed by one sector: Contemporary art. Which is the one of the most volatile and speculative. The lowest performer is the Impressionist and post-Impressionist sector.
Risk and Returns in the fine art market:
To determine the risk and returns of the fine art market, globally and per sector, 25 years of data of monthly returns have been used. The general art index has given 6.5% average annual return. Per sector: 5.5% for Old Masters, 6.3% for European Impressionists, 7.5% for Modern and a high 9% for Contemporary.
The findings of the author is that the European Impressionist art market has been the most volatile, with an average standard deviation of more than 15%. Old Masters, being, unsurprisingly, the least volatile with an average annual standard deviation of 7%.
In Finance risk is generally measured by standard deviation. For the fine art market, the same approach was taken by the author. For a unit of risk, the Modern and Contemporary art sectors offer the highest returns.
Conclusion:
There has been extensive research on the subject, wealth managers are now increasingly diversifying their portfolios with art, so the answer to the original question is yes. Art can be considered, in terms of fact, figures and returns, as a financial investment. But there is one major difference compared to the more classical assets. Indeed, in finance there is always one thumb rule to remember: emotions should not influence your investment decisions. But the question them becomes: can the same be said for art? Is investing in art without emotions possible?