On the valuation of psychic returns to art market investments

Erdal Atukeren and Aylin Seçkin ()
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Aylin Seçkin: Istanbul Bilgi University

Economics Bulletin, 2007, vol. 26, issue 5, pages 1-12

Abstract: Investing in art objects yields financial and psychic returns. The psychic returns arise since art has a superior consumption good aspect as well. The question is whether it is possible to measure the psychic returns. One valuation method for estimating the psychic returns to investing in artworks is their rental price. Here, we make use of the prices charged by a Canadian fine art company for its art rental services and calculate the implied psychic returns to be about 28 percent. Next, we review the finance-theoretic approaches to measuring the psychic returns to investing in artworks. We follow Hodgson and Vorkink’s (2004, Canadian Journal of Economics) suggestion that the alpha parameter in the CAPM captures the extent of net psychic returns. The evidence on alpha from the art market applications of the CAPM coupled with the transaction cost data from international art auctions also suggests that the psychic returns to investing in artworks might amount to about 28 per cent.

Keywords: Art market applications of the CAPM; Economics of art markets; Market for paintings.; Psychic returns (search for similar items in EconPapers)
JEL-codes: Z1 G1 (search for similar items in EconPapers)
Date: 2007 Written 2007-12-19
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