Art as an Investment and Conspicuous Consumption Good

摘要

This paper reconciles the observations of a burgeoning, volatile art market and (on average) low long-term returns with the consumption-based motive for savings. Financial returns are low since they tell only part of the story: the price of art reflects not only the desire to smooth consumption over time as for any investment vehicle, but also the utility derived from its conspicuous consumption. The utility dividend, in turn, endogenously moderates the level of art returns. While the cyclically and variance of artwork returns are similar to those of equity-they are both driven by the stochastic endowment process-art investors need to be compensated by less in financial terms for the risks they are incurring.