TEFAF Art Symposium 2012
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Transcript of TEFAF Art Symposium 2012
EMOTIONAL VALUE & ART INVESTMENT
Friday, 16 March 2012,
Maastricht
ING ART MARKET SYMPOSIUMMAASTRICHT AMSTERDAM
EMOTIONS, EMOTIONAL ASSETS, & ART INVESTMENT
• To what extent does being in a good mood affect art prices?
• Positive emotions affect our optimistic judgement
• Kirschsteiger, Rigotti and Rustichini (2006) - Good mood implies greater gift giving.
• Loewenstein, Hsee, Weber and Welch (2001) Inducing good mood increases the probability of good outcomes
• We like to give greater weight to the probability of ‘positive’ events, and discount ‘negative’ events.
BEHAVIOURAL FINANCE: WEATHER AFFECTS OUR MOOD
• Some evidence of mood affecting stock prices.
• Mood is proxied by the weather. – Cloudy days and NYSE - Saunders (1993);
– International - Hirschleifer&Shumway (2003);
– Effect driven by market makers - Goetzman& Zhu (2005);
• Seasonal Affective Disorder (SAD)– Stock returns correlate with the length of the day - Kamstra,
Kamer and Levi (2003)
• Cloud coverage and sunshine hours
LONDON ART PRICES
• Over 10,000 sales prices between 1990-2007
• High quality artworks and consistently high attendance
rates
• Dataset used is from the European Database for Art
Sales Prices
• Repeat Sales from this dataset:
London All Art Index© and the
Mei-Moses World All Art Index©
WHY WE BUY ART?
Data from 19 Private Banks in Luxembourg (Deloitte)
140 Auction Houses and Dealers, Art Advisors (ArtTactic)
48 International Collectors
DICHOTOMY OF INVESTING IN ART
• Investors
– Want financial return
– Pecuniary benefits
• Collectors
– Want emotional returns
– Non-pecuniary
– Expressive benefits
• Both investors and collectors have affective responses
• Valuation framework which encompasses these values
THE OPTIMAL FUND STRUCTURE
1. Investment funds have the ability to reduce financial risk
2. Boutique funds have the ability to reduce idiosyncratic financial risk whilst maintaining emotional value
3. Collectors retain the full emotional value
Optimal Point:
MU reduction in emotional value = MU from increase in the financial risk
-> Trade off between objective financial risk and subjective emotional value
LONDON REPEAT SALES ART INDEXES
London All Art Index© and the Mei-Moses World All Art
Index©
0
5
10
15
20
25
30
35
40
London All Art Index
European All Art Index
World All Art Index
NY All Art Index
EMOTIONS AND INVESTMENT
1. How emotions affect art prices
2. How assets with emotional elements affect
us
3. Private and Common Value to art prices
4. Art Price Index – how art prices change
over time
5. Art returns reflect changing tastes and
fashion
6. Cannot predict the future
7. Investors care about financial and
emotional value
8. For love and for money!