Investment returns and economic fundamentals in international art markets

Works of art are neither easily tradable across borders, nor evaluated according to globally identical standards. This chapter examines geographical segmentation and its effects on price formation and returns in the international art auction market. The chapter finds (1) a close connection between the country of sale and the type (e.g. nationality) of artworks sold; (2) substantial international variation in average returns to art investments over the period 1971–2007; and (3) an impact of both global and local GDP growth and equity returns on national art market returns. Local fundamentals have not lost importance over time, despite increased economic integration. Yet, country-specific economic factors matter less in determining the auction outcomes for high-end art. This chapter suggests the continuing importance of international demand differences in shaping the global art market, at least outside the top segment.