Art and Money

What is your preference: Flemish baroque or French impressionism?  Rubens or Monet?  Even if you do not appreciate art, you may be interested to know whether or not art is a good investment over the long run.  Well to help answer this question, Christophe Spaenjers and his co-authors have recently published a fascinating paper in the American Economic Review, which looks at the relationship between art prices, the equity market, and income inequality over the long run – click here.  The most interesting findings are that there is a long-run relationship between returns on the equity market and art prices and that increases in income inequality result in higher art prices.  In other words, as the elite become wealthier they engage in conspicuous investment in and consumption of valuable and exotic assets, which bids up the prices of these assets. 

An earlier version of Christophe’s paper was presented in a seminar at the EFIRG at Queen’s University, and the paper uses an equity index constructed by myself, Qing Ye, Graeme Acheson and Charlie Hickson – click here for details.