Art Portfolios

Abstract:

Art market returns have previously been inferred from equally-weighted price indexes. By
contrast, we examine the returns from art portfolios. We do this through detailed analysis of the art
collection of economist John Maynard Keynes, supplemented by research on simulated portfolios based on
auction prices. We document (1) substantial cross-sectional dispersion in portfolio returns, (2)
performance that is predisposed to transaction-specific risk, (3) return skewness that causes most portfolios
to generate below-average performance, (4) portfolio concentration that amplifies idiosyncratic risk, and
(5) average returns that vary according to the purchase channel. We present implications for users of art
price indexes.