Art as an investment

Abstract

This literature review examines the characteristics of art as an investment object and whether art can produce rates of return comparable to equity or bonds. The literature reviewed covers a theoretical model on the utility of art to consumers based on both financial returns and emotional dividends by Lovo and Spaenjers (2018) and a study of the role of discrete consumption in demand for art. Empirical evidence on rates of return is examined with results showing an opportunity cost when investing in art compared to equity and mixed evidence when compared to bonds. Risk factors specific to art are described and the risk-return profile of art is compared to other. Another question asked is if masterpieces produce the highest returns, since famous paintings are often the ones to break record prices at auctions. Empirical measures of the rate of return of art differ to varying degrees in each study reviewed due to differences in data and methods.