Paper: arXiv 2409.18816

Abstract

This paper presents a novel approach to evaluating blue-chip art as a viable asset class for portfolio diversification. We present the Arte-Blue Chip Index, an index that tracks 100 top-performing artists based on 81,891 public transactions from 157 artists across 584 auction houses over the period 1990 to 2024. By comparing blue-chip art price trends with stock market fluctuations, our index provides insights into the risk and return profile of blue-chip art investments. Our analysis demonstrates that a 20% allocation of blue-chip art in a diversified portfolio enhances risk-adjusted returns by around 20%, while maintaining volatility levels similar to the S&P 500.

Complexity vs Empirical Score

  • Math Complexity: 3.5/10
  • Empirical Rigor: 6.0/10 (capped from 8.5: transaction costs not modelled; no out-of-sample test; see penalty flags)
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper’s math is moderate, primarily using standard portfolio optimization and return calculations, while its empirical rigor is high, evidenced by a large, detailed dataset (81,891 transactions), real-world portfolio simulations, and concrete performance metrics like Sharpe ratios and volatility comparisons.

Research Flowchart

  flowchart TD
  A["Research Goal:<br>Is blue-chip art a viable asset<br>for portfolio diversification?"] --> B["Methodology:<br>Create Arte-Blue Chip Index<br>Track 100 top-performing artists"]
  
  B --> C["Data Inputs:<br>81,891 transactions<br>157 artists, 584 auction houses<br>1990-2024"]
  
  C --> D["Computational Process:<br>1. Index construction &<br>   price trend analysis<br>2. Compare with stock markets<br>3. Portfolio optimization"]
  
  D --> E["Key Findings:<br>• 20% art allocation boosts<br>   risk-adjusted returns by ~20%<br>• Volatility similar to S&P 500<br>• Blue-chip art = viable<br>   diversification asset"]

Cited References (20)

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  2. Muses and Markets: Explorations in the Economics of the Arts (1989)
  3. Art as an investment: The market for modern prints (1993)
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  5. Art as an investment and the underperformance of masterpieces (2002)
  6. Vested interest and biased price estimates: Evidence from an auction market (2005)
  7. The auction market for modern prints: Confirmations, contradictions, and new puzzles (2008)
  8. Buying beauty: On prices and returns in the art market (2013)
and 12 more
  1. Art market inefficiency (2013)
  2. Portfolio Diversification Including Art as an Alternative Asset (2023)
  3. Does it pay to invest in art? A selection-corrected returns perspective (2016)
  4. Sentiment and art prices (2014)
  5. Developing artwork pricing models for online art sales using text analytics (2019)
  6. Value of art: Analysis of the factors influencing the prices of paintings (2017)
  7. Speculative trading and bubbles: Evidence from the art market (2022)
  8. A price index for art market auctions (1997)
  9. Art as an investment: Risk, return and portfolio diversification in major painting markets (2004)
  10. The $12 million stuffed shark: The curious economics of contemporary art (2012)
  11. The market for fine art and the economy (2011)
  12. When rationality meets passion: on the financial performance of collectibles (2018)

0 of 20 cited works are in the corpus; resolved via arXiv source bundles, Semantic Scholar and OpenAlex. Corpus-wide: 2518 linked papers.