Speculative trading and bubbles: Evidence from the art market

J.N.G. Penasse, Luc Renneboog

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We examine the role of demand fundamentals and speculative trading in art price dynamics. We show that price run-ups are followed by predictable busts. Prices are positively correlated with proxies for art demand, in particular with the wealth of the top 1% earners, but increases in top wealth also predict low returns. Attributes of the price run-up, including price dispersion, volume, the share of short-term trades, and the share of Postwar Art all contribute to predicting future returns. We rationalize these findings in a stylized model of speculative trading where the impossibility to sell short affects the art price formation.
Original languageEnglish
JournalManagement Science
Publication statusAccepted/In press - Apr 2021

Keywords

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

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