Spotting Over & Under Priced Art Using Econometrics-ArtMetricX
Christie's Sotheby's Bonhams Phillips Art Auction Analysis, Art Econometrics & Time Series Forecasting
Art Advisory | Art Finance | Art Investment | Art Econometric Valuation, Forecasting & Modelling | Independent | Auction House Advisory | Private Advisors | Art Agency |
We provide art buyer services to our clients as a result of the Covid-19 Coronavirus. We act as your agent in art transactions.
We specialise in traversing all the facets of the art market, helping our clients buy the correct art for a long term solid investment.
We act on behalf of the art buyer. Auction houses act on behalf of the seller and offer little service to buyers. Auction houses act to achieve the highest selling price. There is a difference between art price and value, we advise on the optimal bid and so eliminate buyers remorse. We also inspect and survey art to make sure the art work is as described and value for money this is important when dealing with online art. Due to Covid-19 art prices can expect to see a reduction of between 10% - 50% over the next twelve months.
The more recent the art the more easily it can become devalued. Masterpieces by Modern British artists such as Augustus Edwin John, LS Lowry, Mick Rooney, Lucian Freud and Francis Bacon will hold their value over time.Revenues at Christie’s Sotheby’s and Phillips fell 40% in part due to Covid-19
“Blue-chip” Art (defined as the top 100 artists in terms of sales volume) has outperformed the S&P 500 by 180% since 2000. Also its “store of value” characteristics allowed it to decline 26% in the 2008-09 financial crisis versus the S&P which declined 58%.
We believe the risk returns of art are superior to most other asset classes. Art as an asset class has a stronger positive correlation with the price of gold than with other asset classes indicating that investors perceive art as an asset that retains its value rather than as an investment vehicle.
Between art and other asset classes over a longer time span, European Old Masters and Impressionist Art display the lowest correlation. Collectors who resold within three years of purchasing were more likely to achieve outsized gains between 2014 and 2018 of 20%
Investors recognize art as a hedge against inflation with long term return potential which can on occasion outperform the stock market.
High quality art is an international currency immune from local market and economic conditions. Growing global wealth and new buyers should continue to drive demand for art and price appreciation. Art shows low and negative correlations with stocks and bonds which suggests that art can effectively diversify an investment portfolio.
To limit risk and diversify a portfolio using mean-variance optimization twenty five stocks would be considered. In my opinion I would add half a dozen pieces of fine and decorative art such as English & French furniture, Chinese ceramics, European porcelain alongside fine paintings.
Econometrics literally means “economic measurement” A highly effective investment tool. We measure the performance of your art works and their relationship to economic
Variables and other assets and portfolio optimization.
Econometrics is used to answer the following questions:
We construct investment portfolios of fine and decorative art using a mix of traditional art valuation techniques and the best econometric valuation, analysis forecasting methods to manage risk and returns
This masterpiece by Raphael c1505 showing Mary, infant Jesus feeding a lamb belonged to my client who lived in Monaco
We model artwork values and prices using time series analysis & econometric methods
We use financial and statistical models to analyse, value, price, forecast art markets
Eg: If stock markets move up, forex rates move down what is the value of my Picasso NOW?
We calculate the crucial difference between art price and value to determine if an artwork is undervalued or overvalued We decide to buy sell or hold.
We spot MISPRICED ART (OVER/UNDER PRICED)
Art Trader: We calculate mispricing, (low, fair, high price) in the fine & decorative art markets.
We also arrange access to art auction guarantees auction sale advances or art loans
Though tastes are slow to change in well established art markets with broad collecting bases, changes in economic and financial markets which are significant determinants in the formation of art prices –are not. This is why auctioneers forecasts show less volatility than hammer prices. A premium price is paid for works of art which are fresh to the market. The more recent the artist the easier their work can become devalued. With modern and contemporary art returns are high along with volatility or risk of 50% High risk, high reward. The difference in price between an artists average work and his best effort is considerable. High quality art is more resilient to erosions in value. What defines art quality is of course subjective but in practice poses a challenge the more recent the artist or art category.
The right time to buy or sell?
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