Vinsamlegast notið þetta auðkenni þegar þið vitnið til verksins eða tengið í það: http://hdl.handle.net/1946/36884
This thesis aims to explore the characteristics of art investment from an economic standpoint by comparing existing literature and using techniques from modern portfolio theory. The objective of this thesis is to explores whether art is profitable as an investment. That is, are the expected returns enough to justify the additional risk incurred? The thesis reviews the formation of the art investment market and defines art as an investable asset as well as examines the key economic factors of the art asset class. This thesis also discusses the non-pecuniary return component of art investment or the aesthetic returns of art in order to account for and explain an ulterior motives investors would have when investing in art. The author reviews and compares the methods of measuring art returns, repeat sale regressions and hedonic regressions and analyses their advantages and shortcomings concluding that though different they provide mostly uniform results. In order to find a comparable metric for determining the performance of art investments in prior literature on art investment, the historical returns and economic cycles of art investments are examined, and a common measurement Sharpe’s ratio is calculated to provide a suitable metric for different investment periods. Ultimately the risk-adjusted performance of the art investment market for the last two decades as measured by a market index is calculated. The results of those performance measurements indicate subpar performance compared to investments in stocks. Due to the limited data available on private art sale transactions the exclusion of those prices from the data sets of prior studies and this one, as well as the fact that auction prices can be considered as wholesale prices, the author concludes that the results of historical comparison from prior studies and the results measured by this thesis can be greatly improved by gaining access to price data for private sale transaction since a large share of the market transactions are private. Furthermore, the results support the claim of aesthetic enjoyment being a predominately driving factor when it comes to investments in art.