Author: Mandel, Benjamin R.

Source: The American Economic Review, Volume 99, Number 4, September 2009 , pp. 1653-1663(11)

Publisher: American Economic Association

Abstract:

This paper provides a simple and empirically plausible model of artworks as investment vehicles. It reconciles the observation that average financial returns for collectibles are low and volatile with the theory of consumption-based asset pricing. Art assets are appealing both for their ability to transfer consumption over time and for their use as signals of wealth, as in the literature on the demand for luxuries. Adding art value to utility, returns also reflect this "conspicuous consumption" dividend; as a result, average financial returns are low. Risk premia for artworks are predicted to be modest or even negative.

Document Type: Short communication

DOI: http://dx.doi.org/10.1257/aer.99.4.1653

Publication date: 2009-09-01

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• The American Economic Review is a general-interest economics journal. The journal is published quarterly and contains articles on a broad range of topics. Established in 1911, the AER is among the nation's oldest and most respected scholarly journals in the economics profession.
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