Australian Art Market Prices During the Global Financial Crisis and Two Earlier Decades

This study constructs a quarterly hedonic price index using 64,203 artworks, by seventy-one well-known modern and contemporary Australian artists, sold at auction houses over the period 19862009. The hedonic regression model includes characteristics such as name and living status of the artist, the size and medium of the painting, and the auction house, quarter and year in which the painting was sold. The resulting index indicates that returns on Australian fine-art averaged one per cent in nominal terms over the period from quarter 1 1986 to quarter 4 2009 with a standard deviation of seventeen per cent. During the global financial crisis spanning quarter 1 2008 and quarter 4 2009, the average art returns declined in nominal terms by close to six per cent with a standard deviation of twenty-one per cent. This study also shows that over the entire period the art market only marginally underperformed the stock and housing markets. The low correlations between these markets suggest the benefits of portfolio diversification.