Valuation_Final Assessment

PORTFOLIO EXERCISE DEMONSTRATING THE PERFORMANCE

OF CERTAIN WORKS AS INVESTMENT VEHICLES FOR THE

YEARS 1996-2005 WITH COMPARISONS TO FINANCIAL

MARKETS FOR THE SAME CALENDAR PERIOD

SUBMITTED TO FULFIL REQUIREMENTS FOR

SOTHEBY’S INSTITUTE OF ART – LONDON

MAAB PROGRAMME 2005/06

ART MARKET VALUATION

STUDENT 0068

SIAL MAAB Programme 2005/06

Art Market Valuation Final Assessment

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AUTHOR’S NOTE: UPON CONSULTATION WITH (AND SUBSEQUENT APPROVAL

FROM) DR. IAIN ROBERTSON, DIRECTOR, MAAB PROGRAMME, I HAVE

STRUCTURED THIS ASSIGNMENT AS A FICTIONAL EXCHANGE BETWEEN A NON-

EXTANT ART ADVISORY FIRM AND AN EQUALLY FICTITIOUS HIGH NET-WORTH

CLIENT. ALL DATA PRESENTED IS FACTUAL AND IS DULY CITED. ANY

RESEMBLANCE TO ANY PERSON(S), LIVING OR DEAD, IS PURELY COINCIDENTAL.

30-31 Bedford Square / Bloomsbury / London WC1B 3EE / United Kingdom

T: 44+020.123.456.789 F: 44+020.123.456.790

1330 Connecticut Ave. NW / Washington DC 20036-1704 / USA

T: 1+202.555.7890 F: 1+202.555.7891

12 May 2006

Dr. Harlan Ellison

10 Decoctor Way

Greenwich, CT 06830

Dear Dr. Ellison,

It was good to hear from you so soon after the holidays. I hope that you and yours are

doing well and enjoying the best of the New Year. Per your request, deltaAXIS LLP is

providing a detailed analysis of certain key works of art that were sold by our firm on

your behalf within the last year. In your attempt to streamline your investments and

prepare for your pending retirement from New York University, this report highlights

some of our more prominent successes in your portfolio.

We have chosen six works that fall roughly into a ten-year time span from date of

acquisition to date of sale. While your sizable collection reflects an interest in a variety of

genres/sectors, we have focused on Modern US Paintings (1945-75) and Rare Books/

Manuscripts to best illustrate to you the performance of your investments over time.

Should you decide to reinvest any/all of the proceeds from these and other sales, we

believe these to be among the best sectors to pursue in terms of risk and projected rate of

return. The state of the art market has never been stronger, with auction houses

reporting record sales for the calendar year 2005, and attendance to the major art fairs has

never been higher. This bodes well for the perceptive investor who may be looking to art

for an alternative to the more traditional securities instruments.

Please feel free to contact me or any of my staff with any questions or concerns you may

have regarding this report. Thank you for choosing deltaAXIS LLP for all of your art

investment and advisory needs.

Sincerely yours,

Morris G. Newman

Vice-President, Client Services

North American Office

ΔΔ AAXXIISS LLLLPP

ffiinnee aarrtt aaddvviissoorryy sseerrvviiccee

Investments Collection Management Conservation Storage / Shipping

Insurance

Personal and Confidential – Dr. Harlan Ellison Valuation Report



Student 0068

TABLE OF CONTENTS

PERFORMANCE OF SELECTED WORKS FROM PORTFOLIO

EXHIBIT A: MODERN US PAINTINGS (1945-75)

OBJECT A1 – JOSEF ALBERS, HOMAGE TO THE SQUARE (GREEN TENSION)

OBJECT A2 – ALEXANDER CALDER, UNTITLED (PAIR OF GOLD CUFFLINKS)

OBJECT A3 – CY TWOMBLY, RAMIFICATION, 1971

EXHIBIT B: RARE BOOKS/MANUSCRIPTS

OBJECT B1 – BESLER, BASILIUS. HORTUS EYSTETTENSIS, SIVE DILIGENS

ET ACCURATA OMNIUM PLANTARUM, FLORUM, STIRPIUM, EX VARRIIS

ORBIS TERRAE PARTIBUS[…]

OBJECT B2 – HAMILTON, SIR WILLIAM. CAMPI PHLEGRAEI, OBSERVATIONS ON

THE VOLCANOS OF THE TWO SICILIES AS THEY HAVE BEEN COMMUNICATED

TO THE ROYAL SOCIETY OF LONDON. [WITH:] SUPPLEMENT[...]

OBJECT B3 – AMERICAS [VISSCHER, NICOLAES II]

OUTLOOK FOR THE FUTURE

EXHIBIT C: CONCLUDING REMARKS

APPENDICES

I. SUPPORTING CHARTS & TABLES

II. PRICE HISTORY OF WORKS

III. MARKET DATA USED IN THIS REPORT

IV. ARTIST DATA USED IN THIS REPORT

BIBLIOGRAPHY




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EXHIBIT A: MODERN US PAINTINGS (1945-75)

We are truly pleased with the results of our sale, via Sotheby’s, of the works in your

portfolio representing Modern US Paintings, 1945-75. The three works highlighted

here best represent the sound investment decision made by our selective purchasing

in the mid-1990s of pieces from this sector. While each of the artists presented

demonstrates a wide range of investment characteristics over the past ten years, we

believe them to be prudent in any discussion of the potential found in the art market.

In this section of the report, we will discuss the actual performance of this sector as a

whole in relation to other potential investment arenas for the years 1996-2005. In

citing both internal and external factors unique to the art market, we hope to present

a clearer picture of the mechanisms behind the figures.

Included with this are analyses of investment risk in this and other markets,

paying particular attention to the ability these works have shown in outperforming

inflation1. Concluding this section is a brief summary of the actual highlighted

works and their sales history for the same period. A more than cursory examination

of the three artists shown in this sector is included to demonstrate the differences –

both subtle and direct – that can occur within a single sector of the art market. This is

no more evident than in Modern US Paintings. The next section of the report will

give the same consideration and analysis of the other highlighted sector in your

portfolio – Books and Manuscripts. To conclude, an attempt is made to divine the

1 All figures and data in this report are in USD ($); subsequently, data for inflation is taken directly from

US Government sources. The only exception is the indexing of the commodity market for gold. For

these figures, we have turned to the London market for data, as it represents the largest volume of

trading in this sphere, thereby presenting a more accurate picture of its performance.




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future for both of these sectors in the art market and their continued potential for

investment.

SECTOR ANALYSIS

The sector of Modern US Paintings 1945-1975 is difficult to pin down as far as

investment potential is concerned. On one hand, some of the greatest prices for art

were achieved in recent years with art from this particular sector of the market, with

2005 being no exception. According to a leading art market researcher, three of the

top ten artists at auction for 2005 were in this sector – Andy Warhol (2), Mark Rothko

(5), and Willem de Kooning (7). (Artprice 2006: 16-18) These rankings and

sometimes astronomical auction prices overshadow a fact often overlooked by those

who simply buy art in the hope of its appreciating in value. This is perhaps the most

volatile – in terms of investment – sectors in the art market today.

When compared with other sectors of the market, time “has not tested the

strength of its artists’ price indexes.” (Artprice 2006) Our own analysis of the sector

in comparison to other financial markets bears this out. In addition, we have

undertaken an analysis of the three artists from this sector represented in your

portfolio – Josef Albers, Alexander Calder, and Cy Twombly. All have produced

works that buck the trend in post-war American art and defy the assumption of

volatility in that sector.

We would first like to turn your attention to Modern US Paintings and its

performance when viewed against other financial markets. By indexing market data

from 1996-2005, we have established evidence to indicate that the pundits are right –

at least in regards to the sector’s volatility. However, the sector easily outpaces two




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disparate other markets in terms of value (App. I, Chart 2). In fact, the annualised

rate of return (ARR) for the years 1996-2005 in Modern US Paintings outpaces both

the S&P 500 and Gold Indexes by 29.87% and 77.23%, respectively (App. I, Chart 6).

Assuming one could invest in this sector of the market as a whole2, the risk is

great. This is in keeping with their rate of return. Our analysis shows the volatility

of this sector to be among the highest we have seen with a standard deviation (the

industry standard for measuring risk in any given investment by observing past

performance) of 5.11%, well above the figure computed for the S&P 500 and Gold

(App. I, Chart 5).

INDIVIDUAL ARTISTS IN PORTFOLIO

As stated before, the elements of your portfolio represented in this sector exceed all

expectations in relation to the sector in all aspects of our analysis. We have examined

each piece sold by our firm at auction on your behalf and produced a brief insight

into the mechanisms behind this astounding performance. Our first in your portfolio

to come up for auction was Homage to the Square (Green Tension), by Josef Albers. We

first acquired this work for you at auction in 1997 for $33,014. In November, it

fetched a respectable $200,000 at Sotheby’s Contemporary Art Morning Sale.

Adjusting for inflation, this represents a net gain of almost $160,000, giving you a

497.86% return on your investment. This represents a Compound Annual Growth

Rate (CAGR) of 22.22% over the 8-year period you owned the piece.

2 While it is not possible to invest in a fund that tracks the performance of any given sector of the art

market (cf. SPDR – the fund that tracks the S&P 500 and invests accordingly), it is useful to establish the

position of the sector in relation to other potential investments for purely illustrative purposes. Later

discussion of individual artists’ performance is more indicative of performance over a given period of

time.




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These results are entirely in keeping with our research into Josef Albers’

works and their performance in the marketplace. Recent exhibitions at several major

galleries and museums have brought his works to the forefront of the art world’s

consciousness and his work has been performing especially well in the last two years

(App. I, Chart 3). The ARR on his work is also worthy of attention. Over the last ten

years, his works have netted a return of 132.37%. Compared again with other

markets, this is phenomenal growth in an artist from the post-war period (App. I,

Chart 6).

The next artist in your portfolio presents similar results. While more widely

known for his large mobiles that grace practically every major museum of modern

art in the world, Alexander Calder also made jewellery in the latter part of his career.

The purchase of Untitled (Pair of Gold Cufflinks) in the summer of 1996 is a testament

to both your taste and eye for the future. No one piece in your portfolio saw such a

dramatic return on your investment, with a net return of 960.53% from an initial

investment of $2,863 USD (adjusted for inflation). This represents a CAGR of 28.58%

over the ten-year period in was in your portfolio, well ahead of artwork examined in

this report. Comparing with an overall CAGR of 12.5% for his entire market

performance over the same period, this bodes well for his lesser-known œuvre.

Of the three artists in this sector within your portfolio, Calder proves to be the

most historically promising. With a total rate of return of 120.04% over the ten-year

period 1996-2005, and a standard deviation of only 1.71% (App. I, Charts 6 & 5,

respectively), his works represent the greatest rate of return with the lowest risk.

This can be understood if one looks at the prominence of the artist in the public




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consciousness among both connoisseurs and those who are not so familiar with his

work. His name embodies a “mythic status” among American artists (Benhamou-

Huet 2001: 53), thereby enhancing his status within the marketplace. His

omnipresence in most major museums has already been commented upon; it is

perhaps the scale of these works that so firmly fixes his name in the canon of

American art.

A somewhat different picture emerges upon examination of the final post-

war artist in your portfolio, Cy Twombly. Somewhat of an enigma during his long-

spanning career, Twombly’s works are often met with more questions than solutions.

Your recently divested piece, Ramification, is no exception. In his signature ‘stream of

consciousness’ style, Twombly created a work of unusual depth and understatement.

The art market seems to agree; it was snapped up at auction for a healthy $260,000

USD. This represents an inflation-adjusted return of 450.86% and a healthy CAGR of

16.25% for the period of holding.

Upon closer analysis, Twombly’s performance in the art market is as

contentious as the reaction his work often elicits. As a whole, for the years 1996-2005,

Twombly’s risk one of the highest figures for any of the examined sectors, markets,

or artists with a standard deviation of 4.06%. While this may, at first glance, seem

high, it still represents a slightly lower risk than the S&P 500 (App. I, Chart 5). It is

only in the last two years, that his overall index has overtaken the S&P 500 (App. I,

Chart 3). This risk is not without reward. Our analysis shows both the highest Total

Rate of Return and CAGR of any examined market, sector, or artist in this report –

142.79% and 14.23%, respectively (App. I, Charts 6 and 4).




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SECTOR/ARTIST PERFORMANCE VS. INFLATION

In all respects, the artists from the US Modern Paintings all outperform inflation for

the period 1996-2005. Evidence from our examination shows these artists to be

unrepresentative of their sector. For purposes of comparison, our analysts created a

model to demonstrate this fact. Given a $1000 USD initial investment over the ten-

year period 1996-2005, all of our artists produce a final figure well in excess of

inflation and its related investment vehicles, such as bonds (App. I, Chart 8). These

investments still represent a safe way for a guaranteed rate of return over time, but in

no way do they match the results of fine art as demonstrated in our calculations. As

is often said, the higher the risk, the higher the return.

Reasons for this outperforming of inflation are hard to divine. It is possible

that the current growth of the global economy has led to an overall increase across all

asset classes. As investors may still be wary of investing in the equity markets after

the dotcom bubble burst in the early part of the century, alternative asset classes may

present a new way for the returns sought after by the investing public. As this

demand increases and more players enter the market, the natural inclination is for

prices to rise. The strength of the current portfolio under analysis shows that it beats

inflation for all the years under examination, except 2000, the year of the

aforementioned bust (App. I, Chart 9).




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OBJECT A1 – JOSEF ALBERS, HOMAGE TO THE SQUARE (GREEN TENSION)

DATE OF ORIGINAL PURCHASE 11 December 1997

PURCHASE PRICE $33,014

DATE OF SALE 10 November 2005

SALE PRICE $200,000

ADJUSTED PURCHASE PRICE3 $40,172

PERCENTAGE GAIN/LOSS 497.86%

COMPOUND ANNUAL GROWTH

RATE (SEE NOTES FOR

APPENDIX III)

22.22%

3 Adjusted Purchase Price reflects the original purchase price, adjusted for inflation, calculated using the

Federal Reserve Bank of Minneapolis Consumer Price Index Calculator.




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OBJECT A2 – ALEXANDER CALDER, UNTITLED (PAIR OF GOLD CUFFLINKS)

DATE OF ORIGINAL PURCHASE 07 June 1996



SALE PRICE $27,500

ADJUSTED PURCHASE PRICE $2,863



RATE (SEE NOTES FOR

APPENDIX III)

28.58%




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OBJECT A3 – CY TWOMBLY, RAMIFICATION, 1971

DATE OF ORIGINAL PURCHASE 16 November 1995



SALE PRICE $260,000

ADJUSTED PURCHASE PRICE $57,667



RATE (SEE NOTES FOR

APPENDIX III)

16.25%




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EXHIBIT B: RARE BOOKS/MANUSCRIPTS

It is in the analysis of this sector within your portfolio that caused the most

excitement amongst our team of analysts. While we could not perform as rigorous

an assessment on these works, we believe that our results will still show that

Books/Manuscripts represents a strong choice for fine art investing, albeit for

different reasons.

Data on this often overlooked sector of the art market is hard to come by,

with most of the focus placed upon modern first editions and works of more obvious

historical importance. The unique nature of each of the pieces represented in your

portfolio also created its own set of difficulties, as both of the books are singular in

their condition and presentation without being solitary in their origin. Multiple

editions exist for each with varied conditions and provenance affecting their overall

value. The work by Sir William Hamilton best demonstrates this premise. Your

copy, which according to our records, is an inheritance from your great-uncle, the

Rev. John Tewkesbury, does not have an established provenance that could

potentially elevate its value. The same work sold for just over $133,000 USD at an

auction in 2001 (Sotheby’s 2001: 89-90, with gatefold).

As a result, Hamilton’s work was the lowest performer on the auction block

in this sector. The other two works greatly exceeded their presale estimates by an

astonishing percentage, with the Visscher map selling for $260,000 USD, 278.4% over

its presale maximum estimate of $68,704 USD. The Besler volume, with its now

iconic botanical images performed almost as well. Selling for $249,052 USD, 61.1%




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over its presale maximum estimate of $151,584 USD, Hortus Eystettensis...was the star

of the auction. While not achieving the highest sale price, our attendance at the

auction and its preview allowed us to witness firsthand the excitement that this work

brought to the marketplace.

SECTOR PERFORMANCE VS. OTHER MARKETS AND INFLATION

It is in the analysis of this sector compared to other markets that the most surprising

data emerges. Over the period 1996-2005, Books/Manuscripts shows the lowest risk

compared to all other markets, sectors, and artists, 0.37%. The only artist that comes

remotely close to matching this low of a risk is Alexander Calder. This low risk

would lead the casual observer to conclude that returns were in kind, low but

consistent. This could not be further from the truth. Both CAGR and total rate of

return for the sector outperform the other markets included in our analyses, Gold

and the S&P 500 (App. I, Charts 4 and 6). Its correlation to the S&P 500 presents a

value of 0.18, the highest value for any examined sector or artist in this report. This

positive correlation indicates a closer relation to the results found in the more

traditional equity market (See Apps. III & IV). Our assessment of Books/Manuscripts

as a sector when compared to inflation proved to be just as telling (App. I, Charts 7 &

8). Results of our analysis show a constant return greater than produced by those

equities that either index to inflation.




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OBJECT B1: BESLER, BASILIUS. HORTUS EYSTETTENSIS, SIVE DILIGENS ET

ACCURATA OMNIUM PLANTARUM, FLORUM, STIRPIUM, EX VARIIS ORBIS

TERRAE PARTIBUS, SINGULARI STUDIO COLLECTARUM, QUAE IN

CELEBERRIMIS VIRIDARIIS ARCEM EPISCOPALEM IBIDEM CINGENTIBUS,

HOC TEMPORE CONSPICIUNTUR, DELINEATIO ET AD VIVUM

REPRAESENTATIO. [NUREMBERG]: 1613

DATE OF ORIGINAL PURCHASE N/A

PURCHASE PRICE N/A


SALE PRICE $249,052

PRE-SALE ESTIMATE (MINIMUM) $120,232

PRE-SALE ESTIMATE (MAXIMUM) $154,584

PERCENTAGE BY WHICH FINAL

HAMMER PRICE BEAT ESTIMATES 107.1% / 61.1%




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OBJECT B2: HAMILTON, SIR WILLIAM. CAMPI PHLEGRAEI. OBSERVATIONS ON

THE VOLCANOS OF THE TWO SICILIES AS THEY HAVE BEEN

COMMUNICATED TO THE ROYAL SOCIETY OF LONDON. [WITH:]

SUPPLEMENT TO THE CAMPI PHLEGRAEI BEING AN ACCOUNT OF THE

GREAT ERUPTION OF MOUNT VESUVIUS IN THE MONTH OF AUGUST 1779.

NAPLES: [FOR PETER FABRIS], 1776-1779


PURCHASE PRICE N/A


SALE PRICE $51,528




HAMMER PRICE BEAT ESTIMATES 20.0% / -




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OBJECT B3: AMERICAS [VISSCHER, NICOLAES II]


PURCHASE PRICE N/A


SALE PRICE $260,000




HAMMER PRICE BEAT ESTIMATES 332.5% / 278.4%




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OUTLOOK FOR THE FUTURE

EXHIBIT C: CONCLUDING REMARKS

All investments present a risky proposition to the investor. Nowhere is this more

evidenced than when one decides to invest in fine art. Recent years have seen an

unprecedented boom in the sales of fine art, with a turnover of $4 billion USD in

2005, outpacing the record set the year before of $3.6 billion USD (Artprice 2006).

The factors contributing to this growth are not as easy to pin down as are

comparative figures in other markets. Whereas stocks and other equity investments

are a homogenous product, each capable of being analysed on its respective merits,

fine art defies this type of examination4. Other anomalies found in this attempt to

examine art as a bona fide investment category include transaction costs, lack of

positive dividend generation, and lack of long-term equilibrium pricing (Sagot-

Duvauroux 2003: 57 and Ashenfellter & Graddy 2004: 19).

There is a guarded sense of interest in seeking to exploit the art market as a

potential source of wealth creation for investors. Phillip Hoffman’s Fine Art Fund is

a singular example in today’s marketplace of investment opportunities. Currently in

the process of setting up a second fund to match the performance of his first

successful attempt, Mr. Hoffman remains the sole player in a market that is slowly

gaining momentum. In a recent lecture to business students at a leading London

postgraduate institution, he indicated that of the 18 funds similar to his, only he (and

4 This is not to say that it has not been attempted. In a recent essay, noted German sociologist Olav

Velthuis attempts to construct a paradigm for determining the values of contemporary art in both

Amsterdam and New York by combining elements of economic and sociological modeling techniques.

While not conclusive, it does manage to underscore the difficulty in understanding what, if any,

definitive mechanisms can be ascribed to the process. (cf. Velthuis 2003)




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possibly 2-3 others) had managed to survive and prosper. This would seem to

indicate a concept in its nascence, with the accompanying birthing pains.

In a related move, London-based Barclay’s Bank PLC included a section on

the potential for art as an investment in their Barclay’s Capital Gilt Report 2005.

Alongside other lucrative investment categories, fine art was given a thorough

analysis that reached the conclusion that it represented a good investment potential

with some caveats attached. Firstly, fine art, unlike equity investments, requires a

substantially longer ‘holding period’ in order to maximise returns and lessen risk.

This long period was also emphasised as a means to hedge against inflation, based

upon their research. (Kochugovindan 2005) The exact length of this time period

remains a matter for conjecture and debate. The analysts at Barclay’s indicate a

minimum of 10 years for a portfolio to outperform other markets and inflation in an

appreciable way. Some critics even assign a minimum of 35 years for one to see

appreciable results. (Adam 2005: 54)

Another international financial services giant, ABN-AMRO, has looked at the

potential to be found in fine art funds as an investment vehicle and reached many of

the same conclusions, albeit with a slightly more cautious tone. They emphasise the

inherent problems of liquidity – art cannot be ‘spot traded’ in the same way that

equities can along with issues surrounding historical performance and potential

conflicts of interest. They conclude by stating that

“From an investment perspective the highly volatile

nature of the Art market leads us to maintain a positive

however somewhat lower allocation into the Art

market than the results would suggest given the

returns over the previous 40 years. A second line of

caution lies in the more long-term nature of the Art




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market. High volatility stems from the whimsical nature

of the Art market...” (ABN-AMRO 2005: 13, emphasis

mine)

It is only a matter of time before other players in the field look to diversify their

clients’ portfolios with the addition of fine art funds, with no attention paid to

whimsy, perceived or otherwise.

That being said, it becomes apparent that a more thorough methodology is

needed to assess the state of the market and its pricing. Currently, all indexes used

by professionals to gauge the performance of fine art are limited by the source and

scope of their data. While some, such as the Mei-Moses Index, utilise analysis of

repeat sales of works, others such as Art Market Research and Art Net use hedonic

pricing models to determine the values of their indexes. By no means do these

indexes include all of the art sold in a given period by a particular artist. The only

publicly available price data is that of auction sales (Guerzoni 2005: 54). Prices of

works sold privately through art dealers, galleries, or agents are not available for

analysis as those sales figures are now, and likely to remain, private transactions.

These indices also come under scrutiny for their seeming fixation on only including

paintings, which only account for 30% of overall art sales in any given period (Ibid).

Comparing this finding to other markets and their respective indices suggests that

this practice is akin to only looking at pharmaceutical companies and software giants

when gauging the performance of the NASDAQ, FTSE, or S&P 500.

The overall consensus seems to indicate an inclusion of fine art in any well-

diversified portfolio. Accompanying the more traditional investment sectors of

equities, bonds, and commodities, the high-risk nature of the market for fine art can




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help to increase overall portfolio returns, while providing certain intangible returns

these steadfast contenders cannot. Psychological aspects of aesthetic appreciation

and the contribution to society via the loan value of such works are just two of these

intangibles given credence by experts in the field (Grampp 1989: 153 and

Worthington & Higgs 2004: 264).

A result of “complex interactions that can usually not be explained by

economic theory (such as) the name of an artist...reactions of dealers, critics, museum

directors, art historians, collectors, and investors” (Ginsbugh 2003: 40), the art market

remains an exciting, and potentially hazardous, place for investment. Rewarding the

investor who has the practical understanding and the knowledge to navigate its

largely uncharted terrain successfully with returns that meet or exceed those in other

markets can provide a hedge against the ever-present threat of inflation.

The explosive increase in turnover in recent years has made the art market

more lucrative than ever, with no readily apparent signs of slowing down. Once

again, the sale of a Picasso masterpiece has attracted the world’s attention. With a

hammer price in excess of $90 million USD coming off a pre-sale estimate of $40-50

million USD, it well exceeded everyone’s expectations. This can do nothing but

improve the position of the art market in the eyes of investors. In the diversification

of a portfolio, fine art investment looks to be a sensible and rewarding choice, one

that will only get better with time and further developments to make it increasingly

attractive to a wider range of investors. Far from being the “unnatural couple [with]

marital infighting” (Benamou-Huet 2001: 121), it could prove to be a marriage made

in heaven, for collectors, investors, and artists alike.



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APPENDICES

I. SUPPORTING CHARTS & TABLES

CHART 1 – THE MARKET FOR BOOKS/MANUSCRIPTS VS. THE GOLD MARKET, S&P 500,

AND US CPI, 1996-2005

CHART 2 – THE MARKET FOR MODERN US PAINTING 1945-75 VS. THE GOLD MARKET,

S&P 500, AND US CPI, 1996-2005

CHART 3 – ART MARKET PERFORMANCE OF SECTORS/ARTISTS IN PORTFOLIO VS. S&P

500, 1996-2005

CHART 4 – COMPOUND ANNUAL GROWTH RATE COMPARISON - INCLUDED SECTORS

/ARTISTS VS. OTHER MARKETS (1996-2005)

CHART 5 – RISK ANALYSIS AND COMPARISON (STANDARD DEVIATION) / ALL

INCLUDED SECTORS/ARTISTS AND OTHER MARKETS (1996-2005)

CHART 6 – COMPARISON OF TOTAL RATE OF RETURN FOR ALL INCLUDED

SECTORS/ARTISTS AND OTHER MARKETS (1996-2005)

CHART 7 – YEARLY RETURNS FOR INCLUDED ARTISTS / SECTORS VS. US YEARLY RATE

OF INFLATION

CHART 8 – HYPOTHETICAL $1000 INVESTMENT FOR THE YEARS 1996-2005 / US

INFLATION RATE (μ) VS. ALL INCLUDED ARTISTS/SECTORS AND S&P 500 INDEX

CHART 9 - COMPARISON OF ELLISON PORTFOLIO VS. THE US CPI AND THE S&P 500

FOR THE YEARS 1996-2005

TABLE 1 – HISTORICAL US RATE OF INFLATION (JAN 96 – DEC 05)

TABLE 2 – HISTORICAL US CONSUMER PRICE INDEX (CPI) (JAN 96 – DEC 05)

II. (A) PRICE HISTORY OF WORKS (US MODERN PAINTING 1945-75)

(B) PRICE HISTORY OF WORKS (BOOKS/MANUSCRIPTS)

III. MARKET DATA USED IN THIS REPORT

IV. ARTIST DATA USED IN THIS REPORT



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Source: Art Net™/The Price Database, Accessed 08 April 2006

APPENDIX II(B) – Price History of Works (Books/Manuscripts)

Basilius Besler

Title HORTUS EYSTETTENSIS, SIVE DILIGENS ET ACCURATA

OMNIUM PLANTARUM, FLORUM, STIRPIUM, EX VARIIS ORBIS

TERRAE PARTIBUS, SINGULARI STUDIO COLLECTARUM, QUAE

IN CELEBERRIMIS VIRIDARIIS ARCEM EPISCOPALEM IBIDEM

CINGENTIBUS, HOC TEMPORE CONSPICIUNTUR, DELINEATIO

ET AD VIVUM REPRAESENTATIO. [NUREMBERG]

Year 1613

Sale Of Sotheby's London: Thursday, Nov 17, 2005 [Lot 60] Valuable Printed

Books: Natural History, Travel, Atlases, Continental books &

Manuscripts

Estimate £70,000 - £90,000

Sold For £170,400 / $292,679 PREMIUM (£145,000 / $249,052 HAMMER)

Sir Alexander Hamilton

Title CAMPI PHLEGRAEI. OBSERVATIONS ON THE VOLCANOS OF

THE TWO SICILIES AS THEY HAVE BEEN COMMUNICATED TO

THE ROYAL SOCIETY OF LONDON. [WITH:] SUPPLEMENT TO

THE CAMPI PHLEGRAEI BEING AN ACCOUNT OF THE GREAT

ERUPTION OF MOUNT VESUVIUS IN THE MONTH OF AUGUST

1779. NAPLES: [FOR PETER FABRIS]

Year 1776-1779



Manuscripts

Estimate £25,000 - £30,000

Sold For £36,000 / $61,834 PREMIUM (£30,000 / $51,528 HAMMER)

Nicholaes Visscher II

Title Americas

Year c. 1710



Manuscripts

Estimate £35,000 - £40,000

Sold For $296,000 PREMIUM ($260,000 HAMMER)



Student 0068

Source: Art Net™/The Price Database, Accessed 08 April 2006

APPENDIX II(A) – Price History of Works (US Modern Painting 1945-75)

Josef Albers

Title Green tension

Year 1951

Medium Oil on Masonite

Size 24 x 24 in. / 61 x 61 cm.

Misc. Signed, Inscribed

Sale Of Sotheby's New York: Thursday, Nov 10, 2005 [Lot 145] Contemporary Art / Morning

Estimate $100,000 - $150,000


Title Homage to the Square: Green tension

Year 1951

Medium Oil on Masonite

Size 24 x 24 in. / 61 x 61 cm

Misc. Signed, Inscribed

Sale Of Sotheby's London: Thursday, December 11, 1997 [Lot 152] Contemporary Art - Part II

Estimate £20,000 - £25,000 BP ($33,540 - $41,925)

Sold For £23,000 ($37,966) PREMIUM (£20,000/$33,014 HAMMER)

Alexander Calder

Title Untitled (Pair of gold cufflinks)

Year 1945 -

Medium gold

Size 1.3 x 0.7 in. / 3.2 x 1.9 cm.


Estimate $8,000 - $12,000


Title Cufflinks

Medium Sculpture gold

Size 1.3 x 0.7 in. / 3.2 x 1.9 cm.

Sale Of Sotheby's Arcade: Friday, June 7, 1996 [Lot 249] Modern & Contemporary Paintings

Estimate $1,000 - $2,000


Cy Twombly

Title Ramification

Year 1971

Medium oil, pencil, collage and oilstick on paper

Size 33.3 x 27.2 in. / 84.5 x 69.2 cm.

Misc. Signed


Estimate $250,000 - $350,000


Title Ramification

Year 1971

Medium Oil on Paper w/pencil & oilstick on paper collage

Size 33.3 x 27.2 in. / 84.5 x 69.2 cm.

Misc. Signed

Sale Of Sotheby's New York: Thursday, Nov 16, 1995[Lot 193] Contemporary Art Part II

Estimate $45,000 - $65,000




Student 0068

BIBLIOGRAPHY

BOOKS/JOURNALS/PERIODICALS

ABN-AMRO. (2005) ABN-AMRO Bank N.V. Art Funds Initiative: 2005 Global Road

Show.

ADAM, GEORGINA. (2005) ‘You can make money on art, but only after 35 years.’ The

Art Newspaper, n157, April 2005, p. 54

ARTPRICE. (2006) Art Market Trends 2005. Paris: Artprice

ARTPRICE.COM (2006) ‘A peak in the art market in 2005?’ [Internet]

http://web.artprice.com/AMI/AMI.aspx?id=MDg0Mzg0MjcxNTQ3OTk=&1=en.

Viewed 15 March 2005.

ASHENFELTER, ORLY & GRADDY, KATHRYN. (2004) Art Auctions. [Distributed Reading

for Valuation Strand/Sotheby’s Institute of Art-London, MAAB Course 2005-06]

BARCLAY’S BANK PLC. (2005) Barclay’s Capital Gilt Report 2005. London: Barclay’s

Bank PLC

BENHAMOU-HUET, JUDITH. (2001) The Worth of Art: Pricing the Priceless. New York:

Assouline

GINSBURGH, VICTOR A. (2003) ‘Art Markets.’ In TOWSE, RUTH. (ed.) (2003) A Handbook

of Cultural Economics. Cheltenham, United Kingdom: Edward Elgar Publishing, Ltd.,

pp. 40-56

GRAMPP, WILLIAM D. (1989) Pricing the Priceless: Art, Artists, and Economics. New

York: Basic Books

GUERZONI, GUIDO. (2005) ‘Analyzing the price of art: what the indices do not tell

you.’ The Art Newspaper, n157, April 2005, p. 54

HEILBRUN, J. & GRAY, C.M. (1999) The Economics of Art and Culture. New York:

Cambridge University Press

HOPE, ALEXANDER. (2005) ‘The nature of supply and demand in the Old Master

picture market.’ In ROBERTSON, IAIN. ed. (2005) Understanding International Art

Markets and Management. London: Routledge, pp. 195-213

KOCHUGOVINDAN, SREEKALA. (2005) ‘Stocks, Bonds...or Art?’ In BARCLAY’S BANK

PLC. (2005) Barclay’s Capital Gilt Report 2005. London: Barclay’s Bank PLC, pp. 61-71



Student 0068

ROBERTSON, IAIN. ed. (2005) Understanding International Art Markets and Management.

London: Routledge

SAGOT-DUVAUROUX, DOMINIQUE. (2003) ‘Art prices.’ In TOWSE, RUTH. (ed.) (2003) A

Handbook of Cultural Economics. Cheltenham, United Kingdom: Edward Elgar

Publishing, Ltd., pp. 57-63

SOTHEBY’S. (2005) Contemporary Day Sale, New York: 10 November 2005, 10:15 AM

SOTHEBY’S. (2005b) Valuable Printed Books: Natural History, Travel, Atlases, Continental

Books & Manuscripts, London: 17 November 2005

SOTHEBY’S. (2001) The Magnificent Scientific Library of Joseph A. Freilich, January 10, 2001

SOTHEBY’S. (1997) Contemporary Art - Part II, London: Thursday, December 11, 1997

SOTHEBY’S. (1995) Contemporary Art Part II, New York: Thursday, November 16, 1995

TOWSE, RUTH. (ed.) (2003) A Handbook of Cultural Economics. Cheltenham, United

Kingdom: Edward Elgar Publishing, Ltd.

VELTHUIS, OLAV. (2003) ‘Symbolic meanings of prices: Constructing the value of

contemporary art in Amsterdam and New York galleries.’ Theory and Society. April

2003, v32 n2, pp. 181-215

WORTHINGTON, ANDREW C. & HIGGS, HELEN. (2004) ‘Art as an investment: risk,

return, and portfolio diversification in major painting markets.’ Accounting & Finance.

July 2004, v44 i2, pp. 257-271

ONLINE DATABASES

ART MARKET RESEARCH – http://www.artmarketreport.com

ART PRICE DATABASE (ARTNET) – http://artnet.com

ART SALES INDEX – http://artauctionresults.com

US BUREAU OF LABOR STATISTICS – http://data.bls.gov

FEDERAL RESERVE BANK OF MINNEAPOLIS: CONSUMER PRICE INDEX CALCULATOR –

http://minneapolisfed.org/research/data/us/calc/

SOTHEBY’S ONLINE CATALOGUES – http://search.sothebys.com

Documents

Valuation_Final Assessment