Empirical Economics

, Volume 28, Issue 4, pp 649-668

First online:

Art as an investment: Short and long-term comovements in major painting markets

  • Andrew C. WorthingtonAffiliated withSchool of Economics and Finance, Queensland University of Technology Email author 
  • , Helen HiggsAffiliated withSchool of Economics and Finance, Queensland University of Technology

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This paper examines the short and long-term price linkages among major art and equity markets over the period 1976–2001. The art markets examined are Contemporary Masters, French Impressionists, Modern European, 19th Century European, Old Masters, Surrealists, 20th Century English and Modern US paintings. A global equity index (with dividends and capitalisation changes) is also included. Multivariate cointegration procedures, Granger non-causality tests, level VAR and generalised variance decomposition analyses based on error-correction and vector autoregressive models are conducted to analyse short and long-run relationships among these markets. The results indicate that there is a stationary long-run relationship and significant short and long run causal linkages between the various painting markets and between the equity market and painting markets. However, in terms of the percentage of variance explained most painting markets are relatively isolated, and other painting markets are generally more important than the equity market in explaining the variance that is not caused by innovations in the market itself. This suggests that opportunities for portfolio diversification in art works alone and in conjunction with equity markets exist, though in common with the literature in this area the study finds that the returns on paintings are much lower and the risks much higher than in conventional financial markets.

Key words

Art and collectibles portfolio diversification market efficiency risk and return

JEL classification

C32 D12 G11