Art as an Investment and Conspicuous Consumption Good | Zendy

Benjamin R. Mandel | Zendy

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Art as an Investment and Conspicuous Consumption Good

Author(s) -

Benjamin R. Mandel

Publication year - 2009

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.99.4.1653

Subject(s) - economics , consumption (sociology) , dividend , investment (military) , capital asset pricing model , conspicuous consumption , financial economics , value (mathematics) , asset (computer security) , microeconomics , monetary economics , finance , social science , emerging markets , computer security , machine learning , sociology , politics , political science , computer science , law

This paper provides a simple and empirically plausible model of artworks as investment vehicles. It reconciles the observation that average financial returns for collectibles are low and volatile with the theory of consumption-based asset pricing. Art assets are appealing both for their ability to transfer consumption over time and for their use as signals of wealth, as in the literature on the demand for luxuries. Adding art value to utility, returns also reflect this "conspicuous consumption" dividend; as a result, average financial returns are low. Risk premia for artworks are predicted to be modest or even negative. (JEL G11, Z11)

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