Bubbles and Trading Frenzies

Evidence from the Art Market

J.N.G. Penasse, L.D.R. Renneboog

Research output: Working paperDiscussion paperOther research output

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Abstract

The art market is subject to frequent booms and busts in both prices and volume, which are difficult to reconcile with models where agents are rational and hold homogenous beliefs. This paper shows that (i) volume is mainly driven by speculative transactions; (ii) positive price-volume correlation is pervasive across art movements, and is larger for the most volatile segments of the art market; (iii) volume predicts negative long-term returns, a relation that is statistically and economically large. Overall, our evidence supports the bubble model of Scheinkman and Xiong (2003), which predicts that speculative trading can generate significant price bubbles, even if trading costs are huge and leverage is impossible.

Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages49
Volume2014-068
Publication statusPublished - 13 Nov 2014

Publication series

NameTilec Discussion Paper
Volume2014-046

Fingerprint

Bubble
Art market
Trading costs
Price bubbles
Long-term returns
Art
Leverage

Keywords

  • art market
  • bubbles
  • return predictability
  • auction
  • trading volume

Cite this

Penasse, J. N. G., & Renneboog, L. D. R. (2014). Bubbles and Trading Frenzies: Evidence from the Art Market. (Tilec Discussion Paper; Vol. 2014-046). Tilburg: Finance.
Penasse, J.N.G. ; Renneboog, L.D.R. / Bubbles and Trading Frenzies : Evidence from the Art Market. Tilburg : Finance, 2014. (Tilec Discussion Paper).
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Penasse, JNG & Renneboog, LDR 2014 'Bubbles and Trading Frenzies: Evidence from the Art Market' Tilec Discussion Paper, vol. 2014-046, Finance, Tilburg.

Bubbles and Trading Frenzies : Evidence from the Art Market. / Penasse, J.N.G.; Renneboog, L.D.R.

Tilburg : Finance, 2014. (Tilec Discussion Paper; Vol. 2014-046).

Research output: Working paperDiscussion paperOther research output

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Penasse JNG, Renneboog LDR. Bubbles and Trading Frenzies: Evidence from the Art Market. Tilburg: Finance. 2014 Nov 13. (Tilec Discussion Paper).