The Indian Economy Blog

February 8, 2009

Is Emerging Market Art An Alternative Investment Class?

Filed under: Capital markets,China — Prashant @ 5:58 pm

FII to broker: Hold off on those INFY shares, get me a bunch of Hussains & Pynes nstead

Two academics evaluate the returns of the art markets in India, Russia and China over the last decade, using a portfolio theory/ CAPM framework.

Investors constantly hunt for alternative assets that might improve the risk-adjusted returns on their financial portfolios. When stock markets experience a downswing, investors search for more profitable alternatives. Financial newspapers fill headlines with record prices paid for certain works of art, giving rise to the idea that investing in art might be a profitable pursuit. Moreover, Artprice recently reported a booming emerging art market for Russia, 780% growth for the Chinese
15 (contemporary) art market since 2001, and 830% for the Indian (contemporary) art market in
the past decade.

To determine if these reported returns are feasible and indicate reasonable investment alternatives, we analyze whether investing in emerging art markets yields a competitive risk-adjusted
return in comparison with other, more traditional asset classes that could be used optimally to
diversify a financial portfolio.

India exhibits the strongest Sharpe ratio of all three emerging art markets and by far the strongest average annual return. Moreover, the Indian art index has a negative market beta and a nearly zero correlation with the S&P 500, which makes it another interesting investment for a well-diversified portfolio. Link

I know very little about art or art markets, since my “right brain” never progressed beyond those sunsets and sunrises in 4th grade, and hence can’t really offer any opinions here. Perhaps some readers are better informed?

HT: Felix Salmon

1 Comment »

  1. The Indian art market too is past its first wave of success according to the Telegraph of the UK.

    “comes at a time when the Indian art market is feeling the chill of recession. Having experienced an unparalleled five-year boom, at first for modern art from the Fifties and Sixties, and then for more recent work by younger artists, cracks began to appear last autumn. In September, a sale at Sotheby’s saw half the works by Indian contemporary artists go unsold. In October, ArtTactic, a research group which analyses the performance of emerging markets, reported that confidence in the Indian contemporary art market had fallen drastically…..”

    |Full article here: http://www.telegraph.co.uk/culture/art/artsales/4435563/Art-Sales-TV-Santhoshs-Living-With-a-Wound.html

    Comment by aanteladda — February 10, 2009 @ 2:56 am

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