Evaluation of Contemporary art as an alternative investment

Abstract

Bibliographic note HAVLOVICOVÁ, Alice. Evaluation of Contemporary art as an alternative in- vestment Prague 2020. 66 pp. Bachelor thesis (Bc.) Charles University, Faculty of Social Sciences, Institute of Economic Studies. Thesis supervisor Mgr. Lukáš Vácha, Ph.D. Abstract This thesis investigates the investment performance of contemporary art. In order to analyze the risks and returns of the unique art market environment, the reader is presented with the market specifics, trends, and inefficient. The financial performance of contemporary art is estimated by means of extended models of hedonic regression and repeat-sales regression. Both methods allowš for the treatment of volatility of the art market caused by the infrequency of trading, resulting in two monthly contemporary art market indices. The in- dices are estimated based on auction results of contemporary art spanning from 2003 to 2015, including all artworks sold at least once, which presents a general overview of the contemporary art market. In line with the academic literature on the topic of art investment, the results suggest lower returns of contemporary art than traditional financial assets. Volatility and Sharpe ratios differ in the two indices. Based on the resulting price indices, we conclude that contempo- rary art presents moderate returns...