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
Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik
RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung
A stellar flare 10 times more powerful than anything seen on our sun has burst from an ultracool star almost the same size as Jupiter
A localization phenomenon boosts the accuracy of solving quantum many-body problems with quantum computers which are otherwise challenging for conventional computers. This brings such digital quantum simulation within reach on quantum devices available today.
Quantum computers promise to solve certain computational problems exponentially faster than any classical machine. “A particularly promising application is the...
The technology could revolutionize how information travels through data centers and artificial intelligence networks
Engineers at the University of California, Berkeley have built a new photonic switch that can control the direction of light passing through optical fibers...
Physicists observe how electron-hole pairs drift apart at ultrafast speed, but still remain strongly bound.
Modern electronics relies on ultrafast charge motion on ever shorter length scales. Physicists from Regensburg and Gothenburg have now succeeded in resolving a...
Engineers create novel optical devices, including a moth eye-inspired omnidirectional microwave antenna
A team of engineers at Tufts University has developed a series of 3D printed metamaterials with unique microwave or optical properties that go beyond what is...
17.04.2019 | Event News
15.04.2019 | Event News
09.04.2019 | Event News
18.04.2019 | Life Sciences
18.04.2019 | Physics and Astronomy
18.04.2019 | Life Sciences