Performance analysis of investing in Chinese oil paintings based on a hedonic regression model of price index

Fang Wang and Xu Zheng

China Finance Review International, 2017, vol. 7, issue 3, 323-342

Abstract: Purpose - The purpose of this paper is to construct a price index for Chinese oil paintings and analyze the financial performance of investing in Chinese oil paintings and its potential for portfolio diversification in Chinese financial markets. Design/methodology/approach - A hedonic regression model is applied to construct a semiannual price index for Chinese oil paintings from 2000 to 2014. The CAPM model, downsideβand standard portfolio optimization are used for analyzing portfolio diversification. Findings - The hedonic regression shows that the majority of hedonic variables, such as dimension, artist’s reputation, living status, medium and auction houses, are statistically significant in estimation. Not only the return from oil painting investments is higher than other equities, but also theβcoefficient of the CAPM model and downsideβindicate that Chinese oil painting may be a good hedging instrument against stock market risk. Furthermore, the portfolio optimizations under standard assumptions suggest that oil paintings as an alternative investment provide diversification benefit. Originality/value - This paper provides a new and comprehensive analysis of characteristics and risks of investing in the Chinese oil paintings.

Keywords: Portfolio diversification; Alternative investment; Chinese oil paintings; Hedonic regression; C13; G11 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:cfripp:cfri-03-2016-0009

DOI: 10.1108/CFRI-03-2016-0009

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