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The fine art of doing business
Name: Gianpiero Pasculli
ID Number: i6134224
Supervisor: Sabine Nievelstein
Date: January 24th, 2019
Word count: 4849
Number of pages: 30
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(Andy Warhol, One Dollar Bill (Silver Certificate), (1962). Courtesy Sotheby's.)
“Business art is the step that comes after Art. I started as a commercial artist, and I want to
finish as a business artist. After I did the thing called “art” or whatever it’s called, I went into
business art. I wanted to be an Art Businessman or a Business Artist. Being good in business
is the most fascinating kind of art... making money is art and working is art and good business
is the best art”
(Warhol, 1975)
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TABLE OF CONTENTS 1. INTRODUCTION……………………………………………………………………4
2. HISTORY OF ART TRADE MARKET AND ITS CHARACTERS……………..5
2.1. Early development……………………………………………………………….5
2.2. Modern market…………………………………………………………………..6
2.3. Technological era………………………………………………………………...7
3. MARKET ANALYSIS……………………………………………………………….7
4. JOURNEY TOWARDS ART EVALUATION……………………………………..8
4.1. Art as finance…………………………………………………………………….8
4.2. Who are the experts……………………………………………………………..8
4.3. Procedure of vetting……………………………………………………………..9
4.3.1 Impact of vetting on pricing……………………………………………..9
5. PRICE DETERMINANTS OF ARTWORKS…………………………………….10
5.1 Heckman’s model to avoid biases………………………………………………10
5.2 Findings……………………………...…………………………………………..11
5.3 Future price determinants……...……………………………………………...12.
5.4 Limitations……...…………………………...…………………………………..13
6. RISKS IN THE MARKET…………………………………………………………13
6.1 Fakes……...…………………………...…………………………...……………13
6.2 Forgery……...…………………………...…………………………...…………14
6.3 Cases of forgery……...…………………………...…………………………...…14
6.4 Impact on investment……...…………………………...………………...……..14
7. GAP IN THEORY: MUSEUMS……………………………………………………15
4.1. Collection……...………………………...…………………………...………….15
4.2. Future scenarios……...…………………………...…………………………...16
8. CONCLUSIONS……………………………………………………………………17
9. LITERATURE…………………………………………………………………...…18
10. APPENDIX………………………………………………………………………….21
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1. INTRODUCTION
The purchase of Leonardo da Vinci’s “Salvador Mundi”- Appendix A, figure 1, by Saudi prince
Bader al-Saud, has created a buzz around the art investors in the world. Various experts
compiled a timeline of the history and the value of the canvas painted by Leonardo da Vinci.
Fifty years prior to this (1958), the same painting had been acquired at a Sotheby’s auction for
USD 57. After being authenticated as a Leonardo, it was first sold for USD 75,000,000 and for
USD 127,500,000 in a second auction. Finally, the Saudi prince purchased it at the record price
of USD 450,312,500 in October 2017. (Kinsella, 2017)
This sale constituted a key event for the further development of the art market. The art market
is considered tough and unpredictable, and many investors believe it to incur in sure losses
without professional expertise. Nevertheless, nowadays the art industry generated revenues of
more than USD 45 billion worldwide (Pownall, 2017). Ever since the biennial 2015/2016, the
art market seems to have found stable growth (Jie, 2018). As a result, it has now become not
only a possible way for investors to differentiate their assets portfolio, but also a chance to see
their investment exponentially increase over time.
The problem statement of this paper is:
“Does art represent a profitable and low risk investment?”
In answering this question, I will start by giving a basic guideline to art investment for potential
investors, examine and propose reasons why art can reach unimaginable prices, and analyze
the level to which art profitability overcomes art risks. It adds to existing literature in several
ways, resuming the history of the art market as well as its dark sides, along with possible
dynamics for the future of the art market.
To do so, it is crucial to first define art. Art may be regarded as everything that inspires us.
Potentially, it would be infinite. For the purpose of this paper I will be referring to art as fine
art: “creative art, especially visual art whose products are to be appreciated primarily or solely
for their imaginative, aesthetic, or intellectual content” (Fine art, 2019).
The focus will be on analyzing previous studies, to understand the behavior of art market and
assess the level of volatility of such an investment. Interviews to experts will be analyzed in
the paper and examples will side up the findings. Different negotiations will be discussed and
records in pricing will be assessed, to make the reader aware of the dimensions reached by the
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art market today. Furthermore, an extensive analysis of price determinants will be made, with
a regression highlighting the most influential ones. Due to usual unwillingness of private
investors to boast their artwork’s buying prices during fairs, and the enormous boundaries of
knowledge needed to build the simplest empirical model, this paper will rather rely on existing
ones.
The first section of the paper will offer the reader an overview of the history of the art market
and the evolution it has been subjected to for the past centuries. The timeline considered for
this purpose will begin with the Renaissance and end with the present state of affairs. The
figure of an art dealer will firstly be presented in this section, along with its metamorphosis
over time. In the second part of this paper, today’s art market and its stable growth will be
economically analyzed. In section 4 to 6, empirical research will be presented and the most
influential price determinants will be displayed and analyzed, alongside an analysis of the
biggest potential investment risks. Within the sections, the role of experts will be examined,
and their importance highlighted. The following section will be reserved to museums. As will
be seen, the immense amounts of artworks they accumulated provides them with power capable
of profoundly changing the art market, if they would become active investors in it. None, or
little study has been conducted in the matter, creating a clear gap in what could be the future
of the art market. Last, main findings and implications will be summarized in the conclusive
section of this paper.
2. HISTORY OF THE ART MARKET AND ITS CHARACTERS
The history of business in art can be divided into two main periods: the early development
(from renaissance to the 18th century) and the modern market (from the 18th century to the
2000’s). We will analyze what factors and which actors were mainly characterizing these
periods. Finally, we will see how technologies have changed the art market.
2.1 Early development
The 16th century, known as the Renaissance, is considered the richest artistic era in history.
Here, the art market was grouped into two segments: a primary market, characterized by the
production and direct sale of artworks (i.e. under commission), and a secondary market, mainly
based on resale and collections.
The primary market developed itself around Florence, Bruges and Antwerp, with artworks
mainly sold to Royal Families and nobles.
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The secondary market, on the other side, saw the creation of art auctions around Amsterdam
and Paris in the 17th century. Those were mainly organized by the Bankruptcy Chamber, which
represented what today we would consider a company’s dilution of assets to pay creditors
(Renda, 2015).
In the early 17th century, the figure of François Gersaint (1696-1750) became central. He can
be considered the first art dealer, who started as a humble merchant, rapidly taking over the
control over the Parisian paintings market (Hook, 2017).
2.2 Modern market
In the 19th century, the salons of Paris became central in the promotion of art. They represented
the only way for an artist to acquire popularity. However, the conservativism of the Paris’
salons represented a constraint for innovative artistic practices because of their main
exponents’ reluctance to consider new techniques (Renda, 2015).
As explained by Hook (2017), the art market as we know it today was shaped by Durand Ruel
and Sir Joseph Duveen.
Ruel owned a gallery in Paris and was the first promoter of innovation. After opening a second
business in London, he entered in touch with several painters of the Impressionism, Monet
among them. He started to buy their paintings and exhibit them among the most popular
collections at the time. In the end, after monopolizing future sales by buying a huge quantity
of innovative paintings, he managed to raise the public’s acceptance towards emerging artists.
On the other hand, Sir Joseph Duveen recognized the enormous potential of exporting and
selling artworks oversea. He acknowledged how “Europe has a great deal of art, and America
has a great deal of money” (Renda, 2015). He became the most influential art dealer in history.
His strategy was to buy Old Masters art from aristocrats in European cities and reselling them
to the emerging billionaires in America. He changed their mentality, convincing them that the
owning of prestigious artworks represents upper class status.
Moreover, his philanthropic attitude and the following massive donations to museums,
contributed to the development of the art museum system. Among its clients we recall several
members of the Rockefeller family (Hook, 2017).
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2.3 Technological era
In the last decades of the 20th century, auctions have become the most popular way to sell art.
Sotheby’s and Christie’s, both founded in the United Kingdom, have created an arguable
duopoly on auctions.
In the first decade of 21st century, they understood the importance of investing in different
channels of communication. Sotheby’s agreed on a partnership with eBay, while Christie’s
developed its own channel of online auctions. This allowed the two companies to target the
segment of speculators, people who are not primarily interested in analyzing the painting for
the art’s sake but are rather making a suggested investment. In 2014 only, online art auctions
generated USD 3,3 billion. (Renda, 2015).
With the increasing entry of speculators into the art market, it can be expected that the number
of online auction slots will eventually overcome the number of traditional ones.
3. MARKET ANALYSIS
After two years of contraction (-10% and -15% respectively in 2015 and 2016), the art market
registered a 20% increase in global auction in 2017. Both the Western and the Eastern market
registered new historical records in auction results (Jie, 2018).
2017 has been very important for other reasons. First, it realized a huge gap between the
previous all-time art auction record (USD 180,000,000) and the new one (USD 450,312,500).
Secondly, since China became an important investor in the art market (2008), for the first time
ever the major actors in it (Europe, America and China itself) have registered a simultaneous
and durable growth. Lastly, 2017 has been the consecration year for emerging economies’
interests in art, as demonstrated by massive expenditures by Arabic countries and Russian
investors.
As found by Pownall (2017), Asia has overwhelmed America for what concerns art
expenditures, placing itself as second continent after Europe. This is a critical factor for market
analysis, considering that the strong cultural roots of the Asian population may cause Asian
investors to buy art solely from local channels, such as China Guardian, main competitor of
Sotheby’s and Christie’s in the oriental countries.
Another factor that influences the art market in 2017 is the willingness to pay for contemporary
art a lot more over the past decades. This has to be monitored constantly to understand if it will
be confirmed in long-time (Pownall, 2017).
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Lastly, the acquisition and donation of Salvador Mundi to the new “Louvre” of Abu-Dhabi is
the empirical conclusion that museums- section 7, are becoming main actors in the art market
(Jie, 2018).
4. JOURNEY TOWARDS ART EVALUATION
As analyzed by Sommerer & Mignonneau (2015) individual demand is the most important
indicator of an artwork’s market value. It adds up to other price determinants that finally
influence the price. It is even more critical than the painting’s aesthetic value. This contrasts
the idea that good art is synonymous with its quality, the time spent on it, the artist’s intrinsic
motivation and his/her attention to details. In recent years, many investors have decided to
invest in art, one of the reasons for which it has reached prices that nobody would have
forecasted only a few decades ago.
High demand for an artwork is also caused by critics’ opinion about it. Additionally, it will
also be analyzed how experts’ opinion influence an artwork.
4.1 Art as finance
Demand for artworks seems to drive the value more than any other indicator. Accordingly, the
art market behavior shows the patterns displayed in the stock market. Being subject to
increasing interest by speculators and investors in the previous decade, prices have increased
like never before.
According to Spaenjers et al. (2015), similar investment strategies of art dealers and collectors
create a copycat effect that, when becomes a group behavior, finally determines an
increase/decrease in the value of an artist. This means that artworks can rapidly change their
value, according to trends.
4.2 Who are experts?
Arora & Vermeylen (2012), distinguish experts in three different groups: theorists, commercial
and modern artistic experts. Each category of experts has determined the art market during its
time. We will focus only on the category that influences an artwork’s evaluation in the current
art market.
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Defined as modern artistic experts, this category includes museums’ curators, trained art
historians, gallerists and art critics writing for journals. Their opinion is critical in assessing
the artwork’s price estimation, because of their decision on the artwork’s originality, and
subsequent certification. But to which extent?
In 1998, during a Christie’s auction “La Bella Principessa”- appendix A, figure 2, was sold for
the price of USD 21,800. When one day, its buyer wakes up to the news that ‘La Bella
Principessa’ was attributed to Leonardo da Vinci. As a result the price increased to USD 150
million just for that reason (Kemp & Cotte, 2010).
4.3 Procedure of vetting
As previously claimed, nowadays the opinion of art critics is crucial in identifying the value of
an artwork. The procedure of validating an artwork as original is referred to as “vetting.
Bernard Blondeel, president of the Committee on the Admission of Objects, explained in an
interview for L’Eventail what vetting is and why it is so important. According to his words,
‘vetting’ is the ‘advisory service that seeks to ensure a high level of quality with respect to the
objects put up for sale by art dealers’. The procedure aims to examine each object presented in
art fairs to assess if the description offered from the parent gallery concedes with its actual state
of being. Different criteria are investigated to determine if an artwork can be attributed to an
artist. Apart from forgeries, over restorations and major damages can finally exclude an
artwork from an exhibition (Blondeel, 2018).
4.3.1 Impact of vetting on pricing
Theoretically, vetting does not have a direct influence on pricing. Experts are not allowed to
object an artwork’s price. Even if their expertise allows them to know the real market value,
they do not express their judgment on the matter, limiting themselves to verifying the
documentation.
In practice, however, vetting is indeed an important source of price determination. During
TEFAF 2018, the Giacometti Old Master Paintings was exhibiting a painting by Pieter Boel,
representing a flamingo- appendix A, figure 3. Its price, considered low for the artwork, was
USD 380.000. Despite the fact that it was previously certificated as painted by Boel, the 2018
vetting commission decided to negate the attribution. The painting’s price dropped to USD
85,000 and remained unsold.
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For obvious reason, as Blondeel (2018) concluded, the identity of experts that will carry on the
vetting procedure in fairs has to remain anonymous, to avoid possible collision with art dealers.
5. PRICE DETERMINANTS OF ARTWORKS
The art market presents indeed similar behavior with the stock market. But what are the most
important factors behind the evaluation of an artwork?
5.1 Heckman’s model to avoid biases
As analyzed by Collins et al. (2009), when investigating an artworks’ values from historical
data according to prices realized during auctions, we do not refer to the usually high number
of art lots not sold. Therefore, basing our analysis of artworks’ price determinants exclusively
from historical data of prices realized would result in a substantial sample selection bias.
Heckman (1979) proposed a two stages procedure to eliminate biases. By undertaking them
we can avoid the violation of assumption about random sampling.
In the first stage – model 3.1, it is estimated the probability that a painting is sold during an
auction
P r(Sold = 1|X) = Φ(Xβ⃗), (5.1)
where Φ shall be intended as cumulative distribution (function of the standard normal
distribution), X shall be intended as a matrix, representing independent (sold + unsold)
variables for the observation, β⃗ intended as a vector of coefficients, and the probability of
selling as Sold (dependent variable). Finally, Xβ⃗ is the inverse Mills ratio- appendix B, section
1, denoted as λ.
In the second stage – model 3.2, after estimating probability of a painting to be sold during an
auction, we include some dummy variables. Heckman (1979) proposes the following model:
log (P rice) = α + T⃗γ + W⃗δ + θ⃗ Λ + E, (5.2)
Here, log(Price) shall be intended as real price of artwork (USD). T shall be intended as vector
of time, with dummy variables equal to 1 is sold in particular year. W is a matrix of k
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independent variables and n observations. Λ represents the characteristics obtained using the
findings in model 3.1, that will eliminate any bias. Finally, term E considers possible errors in
the estimation (Heckman, 1979).
Mizeràkovà (2016) investigated price determinants for artworks by regressing Heckman’s
function. The author constructed a model about auction’s data in the period from 2007 to 2016.
Her sample resulted in 11,630 observations (3,315 unsold and 8,315 sold artworks).
Several artists were taken under examination, as well as the possible difference in
contemporary art evaluation, the years in which the artworks were auctioned and even the
experts’ price estimations. Her results of the regressions of model 3.1 and 3.2 can be found in
appendix C, table 1 and 2.
5.2 Findings
The regression results are very important in the understanding of most influential price
determinants for artworks.
One of the most important auction results are the pre-auction estimates that experts make about
an artwork’s selling price. The regression table shows how higher levels of lower estimate lead
to reduction in demand and therefore to a decreased likelihood of the artwork to be purchased.
On the other hand, the higher the upper estimates, the higher the possibility that a stormy
bidding may happen, due to an increase in demand.
A second finding reveals that artworks proposed by Sotheby’s and Christie’s are more likely
to be sold for higher prices than if they were auctioned by less popular auction houses. Hence,
the popularity of the sellers can be a price determinant itself.
A third and important finding concerns the difference in pricing of contemporary and classic
(and modern) art. The hypothesis was not rejected, hence there is no clear distinction in pricing
between the two periods (Mizeràkovà, 2016).
Finally, as previously mentioned (section 3), very important in determining the valuation of an
artwork is the measure of public interest. (Sommerer & Mignonneau, 2015). In the regression
it is showed how public interest will increase the valuation of an artwork in a quadratic manner
(Mizeràkovà, 2016).
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5.3 Future price determinants
With technological progress, the online buzz around an artwork has become a very important
price determinant. As suggested by Mizeràkovà (2016), an important price determinant can be
found in “Google trends”. As found by the author, with additional percentage in research of
the painting, the artwork’s price will increase in even higher percentages.
As example, let’s analyze Google Trends results for Salvador Mundi- figure 5.3. Searching
worldwide in the google tools, we would find this result from 2008 onwards (when the name
“Salvador Mundi” was given to the painting):
Figure 5.3 (Google Inc. (2019): “Google Trends.” [Online] Available at: https://www. google.com/trends/. [Accessed 3 January 2019].)
It is obvious that on October 1stst, right before being sold for over USD 450 million, public
interest in the painting reached its peak. Level of interest 100 refers to the moment of maximum
notoriety. An explanation of “interest over time” can be found in appendix B, section 2.
This suggests that the idea proposed by Mizeràkovà (2016) finds support when analyzing
Google’s tool for most popular researches.
In my experience, the moment when artwork’s reach their peak value is the moment
immediately after the sale. During TEFAF 2018 in Maastricht, Giacometti Old Masters
Paintings sold a painting by Bernando Cavallino- appendix A, figure 4, that created a buzz
around the fair. We received interviews from several medias, such as the New York Times and
Chicago art review. The painting was known as one of the most beautiful Old Masters in the
fair. We were not allowed to divulgate generalities of the buyer and price of the sale, but in the
following days we received dozens of much higher bids from clients that somehow heard about
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the negotiations. This was due to the increased attention the painting received after being sold.
At the moment, it is situated in a private collection in America.
5.4 Limitations
The previous study focusses on paintings and paper work (paintings, photography). Therefore,
it might not be equally applicable to different types of art.
As listed by Onuchina et al. (2017), classical and old statues easily reach higher prices than
contemporary art (with few exceptions, see e.g. Hirst’s ‘For the love of God’- appendix A,
figure 5). Thus, Mizeràkovà’s (2016) study is not universally applicable to different artwork
types.
Further models should focus on regressing the true difference between classic and
contemporary art pricing. A suggestion for future research is thus a more general model, that
could analyze the price determinants for antiques and sculptures as well.
6. RISKS IN THE MARKET
As previously discussed- section 5.2, “La Bella Principessa”’s authentication as a Leonardo
changed its price from USD 21,800 to USD 150 million.
However, also the opposite can happen. Art is full of fakes and forgeries. What are they and
how do they represent a danger to a potential investor?
6.1 Fakes
An artwork that is a fake is by definition a work that is simply a copy, a replica.
They can be created and sold while the originals are exhibited in a museum without potential
buyers knowing about their existence. Their prices are usually not as high as forgeries.
Sometimes, a fake painting is just a misattribution arisen from help that major artists had
requested to their workshops of smaller artists, or to followers who simply tried to imitate who
gave them inspirations (Chappell & Polk, 2009).
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6.2 Forges
The major risk in art market is to overpay an artwork that will in the end evince itself to be a
forgery, hence lose all of its value. Forgeries, differently than fakes, are works intentionally
meant to be proposed to the art market as originals (Chappell & Polk, 2009). From Renaissance
to modern time, history is full of forgers, many of them talented to the point of not being
recognized for decades.
6.3 Cases of forgery
Forgeries are not uncommon in the art world: shocking was the news of Museum Terrus, south
of France, where they found out that over 60% of the collection was either fake or a forgery
(Zachos, 2018).
One of the most recent forgers was Wolfang Beltracchi, the “Robin Hood of art”. He has
produced and sold over 300 paintings in the last 35 yeas (Kolb, 2015). Unfortunately, he signed
them with names of great masters (such as Picasso, Monet, Kandinsky). He was finally found
when he used titanium white to paint what he signed as a Heinrich Campendonk stemming
from 1914- appendix A, figure 6. Titanium white did not exist at that time (Birkenstock, 2019).
While serving time in jail, he admitted of forging over 300 paintings. Only around 50 people
who acquired paintings by him publicized that (McCamley, 2015). Many more remained silent
in fear to lose millions of dollars of investments. And they will surely try to sell them as soon
as they have the opportunity.
6.4 Impact on investment
An artwork recognized by experts as a forge can suddenly lose all of its value. Wealthy
collectors might end up mourning a missed masterpiece in their collection, but for investors
and speculators the situation might be slightly different.
A massive investment that reveals to be a forgery can leave its investor with a worthless
artwork and empty savings. For this reason, before buying anything in the millionaire art
market, long analysis and careful expert assessment shall be provided by the buyer.
Nevertheless, cases in which forgers remain undetected are not rare.
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7. GAP IN THEORY: MUSEUMS
Another elite place in the art market is reserved to museums. Literature about their role in the
art market is rather scarce and fragmented. A potential investor should be highly aware of the
disruptive impact that they could represent in the near future. Therefore, in the following
section, I will aim at examining the role that museums have in the market dynamics, as well as
their potential impact.
As reported by the art journal review Quartz, museums hold around 95% of the worldwide
artworks. In spite of that, only 5% of their pieces is exposed, while their immense collection is
usually stored in their deposits, including what many would define masterpieces (even dozens
of Picassos and Monets) (Groskopf, 2016). But why do museums collect so much artworks
although it is not in their capacity to display them?
7.1 Collection
Museums are usually the target of donations by different collectors and philanthropists (Hook,
2017). Leaving out speculators who donate to museum to increase their collections’ values,
many donations are made by wealthy philanthropists for the art’s sake: they want artworks to
be in everybody’s domain. Museums, on the other hand, accept any form of donation
irrespective of whether they will exhibit the artwork or not (Groskopf, 2016).
As shown by O’Hare (2005), museums could finance themselves- forever, simply by selling
an incredibly small part of their – not shown – collection. Why do they not capitalize it then?
The practice of selling artworks with the museum as seller is defined as “deaccessioning”. It
is extremely important to realize that there is no law forcing museums to avoid negotiations
about their properties in the United States, while in Europe, many museums are state-financed
in order to preserve the collection from deaccessioning. However, such an action was never
taken by museums, with the belief it would have ended up in a slippery slope, with many
museums financing themselves.
Museums’ management do not donate and/or sell their artwork because of ethical principles
they are bound to. Moreover, the high number of stored artworks helps museums’ curators to
renovate the expositions when trends change.
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7.2 Possible scenarios
The continuous accumulation of artworks by museums is however leading to a possible
scenario where museums behave as active characters in the art market. The consistent
collection that many museums have is almost overwhelming the space where it is conserved.
In a near future, this could bring them to monetize artworks before the bad conditions of
conservations would deteriorate them. But what would the consequences of such a massive
flow of artworks in the market be?
According to the law of supply and demand, low supply and high demand are usually the
indicators of increasing prices (Parkin, 2018). With the museum deaccessioning, the number
of artworks available in the market would be much higher.
Let’s suppose that museum would decide to sell 5% of their un-exhibited artworks. This would
double the number of artworks available for sale in the market. Hence, hypothesizing price as
perfectly elastic to variation in supply, we will have the price of artworks halved.
Accordingly, if hundreds of Picassos were available to collectors, the scarcity of the artist
would no longer be valuable.
Furthermore, since philanthropists donate to museums for the sake of seeing art exhibited to
the public, they will not want their donation to end up in the secondary market. They will
therefore choose smaller museums as receivers of their donations.
Finally, since dispersion of collections damage the real value of the collection itself (O’Hare
2005), being spread across smaller museums may result in the decrease in value of many
collections.
To sum up, museums represent a very powerful, yet silent, character in the art market. Their
decision to capitalize their non-exhibited collection would have a disruptive impact on the art
market as well as dispersion in social benefits. Collections fractioned and not exhibited entirely
in the same location would finally damage the museum community.
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8. CONCLUSION
This paper has analyzed the profitability and potential risks of art investments in the current
market. To provide a better understanding of the current art market, its evolution has been
considered and the figure of the art dealer has been presented over time. Following this, the
analysis of the contemporary market has been contextualized and discussed. It has become
apparent that the art market has reached a stable growth that will likely be maintained in the
years to come. The analysis has also shown the considerable impact expenditures of Eastern
countries may have nowadays. For the first time in history Asian expenditures have overcome
American ones and art sales at auctions have reached new unprecedented dimensions.
Following this development, I presented the factors that most likely influence the monetary
value of art. Along with trends behavior as resembled in the stock market, the influence of
experts is highly influential and determinative to what investors will eventually be willing to
pay. Moreover, to investigate the price determinants of artworks, a comprehensive overview
of a regressed model for 11,630 price realized at Sotheby’s and Christie’s auctions was
presented. It can be deducted from it, that public interest is crucial in assessing art price. In
addition, the null hypothesis that contemporary art is just as valuable as classic art was not
rejected. Hence, there is no considerable difference in pricing between the two categories.
As risks this paper has identified the occurrence of fakes and forgeries, as well as potential
fluctuation in pricing due to unpredictability of trends. Furthermore, it has been assessed that
art may be highly profitable only for short periods of time, i.e. during peaks of demand.
The previous findings have proven that, in presence of high demand and scarce supply, the art
market is highly efficient and investing in it represents a profitable investment.
However, after analyzing the presented literature, I have identified a gap in research and
awareness, as well as a potential danger to the smooth functioning of the art market. Said
danger may constitute of museums actively participating in art market dynamics. This is due
to their massive possession of artworks and their potentially disruptive influence on demand
and supply, if made available for purchase. Risk assessments should be conducted to prevent
future detrimental effects to the art market and further policies should be considered to avoid
dispersion of collections and the consequential impact to the art community.
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9. LITERATURE
Arora, P. & Vermeylen, F. (2012). The end of the art connoisseur? Experts and knowledge
production in the visual arts in the digital age, Information Communication and Society.
Birkenstock, A. (2019). Beltracchi - Die Kunst der Fälschung (original title) [DVD].
Blondeel, B. (2018). INTERVIEW WITH BERNARD BLONDEEL, PRESIDENT OF THE
COMMITTEE ON THE ADMISSION OF OBJECT [In person]. Maastricht.
Chappell, D. and Polk, K. (2009) ‘Fakers and Forgers, Deception and Dishonesty: an
Exploration of the Murky World of Art Fraud’, Current Issues in Criminal Justice, 20(3): 393-
412.
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10. APPENDIX
10.1. APPENDIX A
Figure 1.
(Leonardo da Vinci (1452-1519), Salvator Mundi, painted circa 1500. 25⅞ x 18 in (65.7 x 45.7 cm). Sold for $450,312,500 in the Post-War &
Contemporary Art Evening Sale on 15 November 2017 at Christie’s in New York
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Figure 2.
(Leonardo da Vinci. Ritratto di Bianca Sforza, “La Bella Principessa”, exhibition catalogue, Palazzo Ducale,
Urbino, 2014)
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Figure 3.
(Pieter Boel, 1600 ca., exhibited by Giacometti Old Master Paintings during TEFAF 2018.)
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Figure 4.
(An oil on canvas of Saint Stephen by Bernardo Cavallino sold at TEFAF 2008 by Giacometti Old Master
Paintings to a new client)
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Figure 5.
(Onuchina et al (2017). ‘For the love of God’, Damien Hirst
https://artinvestment.ru/en/invest/rating/top_most_expensive_sculptures_rating.html)
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Figure 6.
A forged Campendonk by Wolfganag Beltracchi, Red Picture with Horses, once believed to
have been painted c 1914
10.2. APPENDIX B
SECTION 1:
The inverse Mills ratio is the ratio of the probability density function to the cumulative
distribution function of a distribution. Its use is often motivated by the following property of
the truncated normal distribution.
(Cuyt et al, 2010)
SECTION 2:
Numbers represent search interest relative to the highest point on the chart for the given region
and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term
is half as popular. A score of 0 means there was not enough data for this term.
(Google Inc., 2019)
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10.3. APPENDIX C
TABLE 1: Results of regression of Heckman’s model 5.1
(See Table 2)
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TABLE 2: Results of regression of Heckman’s model 5.2
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(Mizeràkovà’s (2016) computation of Heckman’s models using BASI, 2016)
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Official statement of original thesis By signing this statement, I hereby acknowledge the submitted thesis (hereafter mentioned as “product”), titled: The Fine Art of Doing Business to be produced independently by me, without external help. Wherever I paraphrase or cite literally, a reference to the original source (journal, book, report, internet, etc.) is given. By signing this statement, I explicitly declare that I am aware of the fraud sanctions as stated in the Education and Examination Regulations (EERs) of the SBE. Place: Paris, France Date: 24/01/2019 First and last name: Gianpiero Pasculli Study programme: International Business EBT Code: EBT0008 ID number: i6130075
Signature:
