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Testing for Bubbles in the Chinese Art Market

Xin Li, Chi-Wei Su, Meng Qin and Fahai Zhao

SAGE Open, 2020, vol. 10, issue 1, 2158244019901249

Abstract: This article detects the existence of bubbles in the Chinese art market and investigates when the bubbles originate and crash. We utilize the generalized supremum augmented Dickey–Fuller (ADF) test to detect explosive behavior in the Chinese art market. The empirical results indicate that there are two bubbles in the Chinese art market that happened in the periods from 2004 to 2005 and 2010 to 2011. The main reasons are the financialization of artworks, the speculation of investment institution, and the fluctuation of macroeconomics in China. Our findings are in agreement with the bubble model improved by Gürkaynak considering that asset price can be decomposed to bubbles and fundamental parts. Therefore, to favor the Chinese art market price stabilization, the regulators from this market should identify bubbles to notice their evolutions. The authorities should also manage the expectations of the public and reduce speculative behavior.

Keywords: price bubbles; generalized supremum ADF test; Chinese art market (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:10:y:2020:i:1:p:2158244019901249

DOI: 10.1177/2158244019901249

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