Returns on art

By Felix Salmon
October 6, 2009
analysis of the art market, and conclude:

" data-share-img="" data-share="twitter,facebook,linkedin,reddit,google" data-share-count="true">

Luc Renneboog and Christophe Spaenjers of Tilburg University have done their own analysis of the art market, and conclude:

Our art index has underperformed stocks since 1951 and bonds over the last quarter of a century (but at a higher risk). Moreover, there are high transaction costs associated with trading art, which reduce the reported returns. When considering the low profitability and the high riskiness of art investments, one can only conclude that art should primarily be bought for its beauty.

This study shows art returning 4.03% between 1951 and the top of the market in 2007. That’s low, in comparison to other findings in the literature:

The returns on art calculated in this study are lower than the outcomes in the often-cited studies by Goetzmann (1993) and Mei and Moses (2002), even though our time frame includes an extra boom period. We argue that this can be explained by the fact that our dataset has a much broader coverage than the ones used in earlier papers, and therefore not only captures the (re)sales by top artists at big auction houses.

I think this works more generally: if you could somehow include in the survey all the art that anybody ever buys, the aggregate returns would certainly be negative. Most art is bought in the primary market and is never sold, mainly because it never can be sold. To all intents and purposes, it has zero monetary value the minute that it leaves the gallery or artist’s studio.

The greatest investors in art never bought art as an investment. If you take the set of all art collectors, statistically speaking some small proportion of them will see their collections grow substantially in value. Those collectors are deemed in retrospect to have had a “great eye”. But people who buy art as an investment are almost certainly going to be disappointed — and even more disappointed if they get someone else to buy art for them.

The only time it makes sense to think in such terms is in terms of asset allocation and risk profile: if a large proportion of your net worth is tied up in art, that should be taken into account when constructing the rest of your investments and your estate planning strategy. But don’t think that art has any real chance of growing substantially in value.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

define art first, then we’ll discuss this

Posted by q | Report as abusive

Valuable and rare old art might have a lot in common with gold. Both may be considered an inert store of value. Neither stocks nor bonds nor currencies can retain value if their nations collapse. Old art is arguably safer than gold because old art is less valuable in the hands of theives than in the hands of its rightful owners. The best art may provide a slight return above inflation and throws off a constant dividend in terms of its beauty and the prestige it confers on its owner.

Posted by Dan | Report as abusive

Felix, you make a good point. Most of us have no hope of identifying deeply valuable art before that value is conferred upon it by the art world. That is where the major returns would be found.

Posted by Dan | Report as abusive

It depends on what you’re buying, I’d say. It’s all about diversification in art — what goes for all investing also goes for visual arts. With the dollar tanking, looking into quality art of all classes (antiquities to contemporary) in markets like China will probably have better returns in the long term, especially as the yuan internationalizes.

Holding on to Chinese works (paid for in USD now) over the next 10 or so years then selling back to Chinese buyers is probably a good investment choice. Plus, it’s portable and looks nice — always a good thing.

I agree in part with Felix we run two gallerys in the uk and our sales are mirrored by the housing market.It certainly is a buyers market and yes to survive we have reduced art cosiderably to compete with the auction houses.One in particular springs to mind,we have a painting by J. STEVEN DEWS who’s paintings of the “Americas Cup”demand prices of £100,000 ours of “Merchantman in a Swell”is now £12,000…….say no more.

In general l agree – its clear that if you buy from galleries you are very unlikely to get your money back. But there are ways to ensure you shouldnt lose much…

First rule is of course to buy where there is already a secondary market (ie check that major auction houses have a market for the artist).

If you stick to auctions its safer – but since if you eventually sell at auction you’ll not only need to allow for buyers premium but the sellers premium too – ie: appx 33% of your investment will go to the auction house (in a flat market, no inflation – buy at 10k, pay appx 12k, then sell at 10k, get appx 8k)

To do better the only answer is to really know your stuff – when buying check your market, only buy art with an existing secondary market, buy very carefully and selectively at auction or haggle with dealer/artist to buy below gross auction prices. When selling do it when you want to – not when you need to, ie: watch the market and sell when you think the market is best for the work.

I could add loads more eg: dont ever buy editions, stick to only the best works by an artists – not secondary works, select their usual style/media.

If you break even youll have done well!

Posted by absolut_bargain | Report as abusive