Art in Times of Crisis

CentER Discussion Paper Series Nr. 2021-026

80 Pages Posted: 28 Sep 2021 Last revised: 6 Jan 2022

See all articles by Géraldine David

Géraldine David

Bibliotheca Wittockiana

Yuexin Li

Tilburg University - Department of Finance

Kim Oosterlinck

Université Libre de Bruxelles - SBS-EM, CEB

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: September 23, 2021

Abstract

Is art a safe haven in times of political or financial distress? We trace the long-term performance of the UK art market, which we relate to crises, such as the world wars, economic recessions, financial crises, inflationary periods, and changes in monetary policy. We digitalized historical auction archives to construct art price indices from the early 20th century onwards. The annual art auction value expanded in real terms more than seven-fold over the past century. Over the whole sample period of 110 years, the arithmetic annual real return amounts to 3.60% and risk to 20.09%.
Art returns plummeted at the onset of wars but turned positive in the later years of wars and then outperformed equities, which suggests that art could serve as a hedge against political uncertainty. During the wars, smaller paintings obtained higher returns, possibly because they are more transportable.
Art follows the evolution of the equity market with a lag of one year. Art is sensitive to economic and financial crises, with the largest slumps occurring in the post-WWI recession, the Great Depression, the oil crisis, the recessions of the early 1980s and the early 1990s, and the Great Recession. By far the largest declines in art returns occurred in 1931 (-63%), and, for the post-WWII period, in 1991 (-37%) when the largest art market bubble in art history burst. We also highlight changes in art preferences for specific paintings by size, art school, art objects’ liquidity, and art(ist)’s nationality across crises.

Keywords: art market; art pricing models; art auction, economic recession, economic history.

JEL Classification: G01, G11, Z11, E30, N14, N24, N44

Suggested Citation

David, Géraldine and Li, Yuexin and Oosterlinck, Kim and Renneboog, Luc, Art in Times of Crisis (September 23, 2021). CentER Discussion Paper Series Nr. 2021-026, Available at SSRN: https://ssrn.com/abstract=3929327 or http://dx.doi.org/10.2139/ssrn.3929327

Géraldine David

Bibliotheca Wittockiana ( email )

Yuexin Li (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Kim Oosterlinck

Université Libre de Bruxelles - SBS-EM, CEB ( email )

50 Avenue Roosevelt, CP114/03
Brussels 1050
Belgium

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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