Researchers at the University of Luxembourg are warning of an overheating art market, one of the fastest-growing investment sectors of the past decade, after applying a new bubble detection method analysing millions of auction records.
Few sectors of the market have rebounded as robustly as art – particularly contemporary art, which has doubled in value since the beginning of the financial recovery following the 2008/09 financial market crisis.
Pundits on the side-lines have commented that such market growth is unsustainable, warning there is a bubble in the making that is sure to burst, as seen in the early 1990s and in 2008/09. Headline-grabbing sales of post-war and contemporary works for over $100 million appear to support this argument. But is a bubble really forming?
Market bubbles are generally defined as a dramatic escalation in the volume of trading in assets at prices that exceed their fundamental value, followed by a sudden collapse. Rational expectations put the fundamental value of an asset as equal to its expected discounted cash flow.
For most assets it is relatively easy to project this value – for example through dividends on stocks or rent on real estate. In the case of art, however, returns can rarely be correlated to costs of production.
To overcome this fundamental issue, Dr Roman Kräussl, Prof. Thorsten Lehnert and Dr Nicolas Martelin, all from the Luxembourg School of Finance at the University of Luxembourg, have used a new and direct statistical method of bubble detection.
They analysed more than one million auction records from the past 36 years, examining six major art styles.
They were thereby able to identify two historical speculative bubbles and find an explosive movement in today’s “Impressionist and Modern”, “Post-War and Contemporary”, “American” and “Old Masters” fine art market segments. In their research, published in the Journal of Empirical Finance, they conclude that today’s art market shows sign of overheating, raising the potential of a severe correction in the foreseeable future.
http://www.sciencedirect.com/science/article/pii/S0927539815001085 - Link to the publication
http://wwwen.uni.lu/recherche/fdef/luxembourg_school_of_finance_research_in_fina... - Personal page of Prof. Roman Kräussl
Britta Schlüter | idw - Informationsdienst Wissenschaft
Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)
How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung
In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport
Cells need to repair damaged DNA in our genes to prevent the development of cancer and other diseases. Our cells therefore activate and send “repair-proteins”...
The Fraunhofer IWS Dresden and Technische Universität Dresden inaugurated their jointly operated Center for Additive Manufacturing Dresden (AMCD) with a festive ceremony on February 7, 2017. Scientists from various disciplines perform research on materials, additive manufacturing processes and innovative technologies, which build up components in a layer by layer process. This technology opens up new horizons for component design and combinations of functions. For example during fabrication, electrical conductors and sensors are already able to be additively manufactured into components. They provide information about stress conditions of a product during operation.
The 3D-printing technology, or additive manufacturing as it is often called, has long made the step out of scientific research laboratories into industrial...
Nature does amazing things with limited design materials. Grass, for example, can support its own weight, resist strong wind loads, and recover after being...
Nanometer-scale magnetic perforated grids could create new possibilities for computing. Together with international colleagues, scientists from the Helmholtz Zentrum Dresden-Rossendorf (HZDR) have shown how a cobalt grid can be reliably programmed at room temperature. In addition they discovered that for every hole ("antidot") three magnetic states can be configured. The results have been published in the journal "Scientific Reports".
Physicist Dr. Rantej Bali from the HZDR, together with scientists from Singapore and Australia, designed a special grid structure in a thin layer of cobalt in...
13.02.2017 | Event News
10.02.2017 | Event News
09.02.2017 | Event News
21.02.2017 | Earth Sciences
21.02.2017 | Medical Engineering
21.02.2017 | Trade Fair News