Paintings, notwithstanding their artistic merits, can also be valuable financial assets. The same goes for other artistic objects such sculptures, photographs, rare books, and certain collectible items. Consequently, this course focuses on the art market from a financial viewpoint.
In recent years this market has grown in size, geographical diversity, and importance. However, many fundamental facts about the art market remain not fully understood; and compared to more established markets –such as stocks and bonds, for example– the art market presents a number of peculiarities that still fascinate scholars and investors, not to mention the popular media.
The motivation for this course is to apply the conventional tools of financial analysis to gain an understanding of the dynamics of the art markets. Special emphasis will be placed on the market for paintings. Nonetheless, the market for other art objects, such as certain musical instruments, antique furniture, classic cars, as well as stamps and photographs, will be discussed as well.
Among other things, the course seeks to help the students to answer concrete questions such as:
- Is it a good idea to buy a Picasso (or a Basquiat) as an investment?
- Can we improve the risk profile of a stock-dominated portfolio by adding a few art-related holdings?
- Is the art market an efficient market? Are there significant asymmetries of information?
- Could the development of art-related derivatives products contribute to improve the liquidity in this market?
- What are the legal or regulatory challenges that this market faces?
- Will the online auction market eventually threaten the dominance of the two major auction houses?
In summary, the course builds on the basic ideas, models and techniques from corporate finance, portfolio theory, economics, and applied statistics to gain an understanding of the functioning of this fascinating segment of the alternative investments space.
Additionally, given the increasing importance of art as an asset class, in all likelihood, even business professionals who are not directly involved with this market (for example, working for an auction house or a wealth management organization) might find themselves involved with art-related financial problems and decisions. Thus, the course will analyze this market segment from several vantage points, more specifically, not only from the viewpoint of a potential investor or speculator, but also from the viewpoint of a commercial banker, insurance company, asset manager, regulator, and auction house.